BofA axes Thain as Merrill deal sours John Thain was ousted from Bank of America on Thursday, just three weeks after closing the sale of Merrill Lynch to BofA, in a sign of the deepening crisis around the deal. Thain, who became chief executive of Merrill 13 months ago, left BofA after a brief meeting with its chief executive, Ken Lewis, who is under pressure from shareholders for paying a premium for Merrill. Since the deal was announced Sept 15, Merrill has disclosed operating losses of $41.2bn for 2008, and BofA's share price has fallen about 80%. Lewis believes Thain had lost the confidence of many of the combined firm's employees and shareholders, say insiders. More FT analysis here and a profile of Thain. See this article online.
http://ftalphaville.ft.com/blog/2009/01/23/51583/bofa-axes-thain-as-m
| Behind Thain's ousting The sudden departure of John Thain from Bank of America, described by BofA as "mutually agreed", came after rising tensions that followed the revelation last week of Merrill's Q4 $15bn loss and after the FT reported Wednesday that he had accelerated Merrill Lynch's bonus payment plan for 2008, and doled out as much as $4bn in discretionary bonuses on Dec 29, just three days before the BofA acquisition closed. Also, CNBC reported that Thain hired celebrity interior designer Michael Smith to redecorate his Merrill office a year ago and ran up a $1.22m bill, including for a $1,405 parchment waste bin and $87,000 rug. See this article online.
http://ftalphaville.ft.com/blog/2009/01/23/51582/behind-thains-oustin
| Gapper blog: Fiddling while Merrill burned Reputations get shredded fast in a financial crisis, but the speed of John Thain's descent from hero to zero is extraordinarily rapid, says the FT's John Gapper. In mid-October, he seemed the smartest guy in the pack, delivering Merrill Lynch to Bank of America for $50bn. Since then, it has been all downhill. Symbolism matters, and Thain's initial attempt to gain a $10m bonus for 2008, as well as details of his $1.22m office redecoration, have turned him into a symbol of Wall Street excess. But most shocking is the FT report that Thain accelerated payments of Merrill bonuses. That act has a ring of fiddling while Rome burned, particularly in view of the Roman theme of his office decorations. See this article online.
http://ftalphaville.ft.com/blog/2009/01/23/51581/gapper-blog-fiddling
| US says China 'manipulating' currency Tim Geithner, President Barack Obama's choice for Treasury secretary, on Thursday accused China of "manipulating" its currency and pledged "aggressive" diplomatic action on the issue. The comment, in a Senate nomination hearing, could raise tensions with Beijing, being the Obama administration's first public intervention in what will be one of its most critical international economic relationships. The US has long felt that China has artificially depressed the value of its currency to boost exports but the Bush administration always stopped short of formally declaring China a currency manipulator. The price of long-term US Treasury bonds fell on Geithner's remarks, amid concerns that Beijing might slow its purchase of US assets. See this article online.
http://ftalphaville.ft.com/blog/2009/01/23/51580/us-says-china-manipu
| £30bn equity rush to hit UK Dozens of British companies are preparing to issue fresh equity in coming weeks with bankers expecting more than £30bn to be raised this year through share offerings. Wolseley, the building materials distributor, is expected to outline plans to raise up to £400m of fresh equity on Monday alongside a trading update. Other companies known to be investigating equity issuance include Premier Foods, Debenhams, Chaucer, the Lloyd's insurer, and a list of property companies including British Land and Land Securities. Bankers say British companies could raise more equity over the next year than at any time since 2000, when according to Dealogic $45bn of new equity was raised by British non-financial companies. See this article online.
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| UK considers new aid to Northern Rock British MPs have urged the UK Treasury to reveal the magnitude of liabilities incurred by the rescue of the banks. A Commons committee report published Friday says that taxpayers deserve to know the potential costs of nationalisations and part-nationalisations. The report comes as the Treasury considers lending Northern Rock, the mortgage lender that was nationalised last year, another £5bn-£10bn. Government support for the bank needs approval from the European Commission, which said on Monday it would make a ruling before early April. See this article online.
http://ftalphaville.ft.com/blog/2009/01/23/51578/uk-considers-new-aid
| UK's top three banks 'need £80bn more' Britain's three top lenders need another £80bn of capital to stabilise the UK financial system and end concerns about their solvency, according to analysts at Nomura, reports the Daily Telegraph. The warning will fuel fears that RBS, Lloyds Banking Group and Barclays may be fully nationalised, coming after a week in which share prices in all three banks have more than halved. Nomura said the latest government bail-out measures do not change the key issue of the "potentially unlimited losses of the banking system, and therefore whether it will ultimately require further capital injections". Comparing the current recession with the 1990s, Nomura estimates that over four years Barclays will record credit losses of £33bn, Lloyds £56bn and RBS £61bn. See this article online.
http://ftalphaville.ft.com/blog/2009/01/23/51577/uks-top-three-banks-
| KBC receives €2bn cash injection KBC Group, one of Belgium's largest remaining banks, is to receive a €2bn cash boost from state coffers after it incurred a full-year loss of €2.5bn. The news comes amid speculation that a further round of Belgian state aid, including the possibility of creating a so-called "bad bank", is being planned by the new federal finance ministry. KBC on Thursday said it was writing down the full value of investments in riskier debt instruments. The structured credit portfolio was marked down €1.9bn, on top of the €2.1bn announced earlier. Other write-downs reflected the wide gamut of investments hit by the financial crisis: its exposure to collapsed Icelandic banks amounted to €200m while falling shares wiped off €700m from its portfolios in the fourth quarter alone. See this article online.
http://ftalphaville.ft.com/blog/2009/01/23/51584/kbc-receives-e2bn-ca
| Santander praised 'impeccable' Madoff A fund controlled by Santander, one of Europe's biggest banks, heaped praise on Bernard Madoff weeks before his arrest for an alleged $50bn fraud, calling his market timing "impeccable" in a report to investors that lawyers say raises questions about the bank's risk controls and due diligence operations. Asset managers at the Spanish bank's Optimal hedge fund investment arm, whose clients were among the biggest losers in the Madoff scandal, told investors they were impressed by Madoff's ability "to find great entry and exit points to benefit investors". Lawyers said reports such as Optimal's would provide ammunition to investors wanting to sue third parties that sold them the Madoff fund. See this article online.
http://ftalphaville.ft.com/blog/2009/01/23/51576/santander-praised-im
| Day of gloom for tech leaders Microsoft on Thursday announced its first company-wide job cuts in its 34-year history, capping a day of gloom for the technology sector. The software giant's plans to cut up to 5,000 jobs came as Sony plunged deeper into crisis after the electronics and entertainment group warned it would suffer its first full-year operating loss in 14 years, of $2.9bn. Nokia also revealed a sharp fall in 2008 profits and issued a gloomy forecast of a 10% fall in global industry sales of mobile phones. Google provided some late relief, reporting its Q4 revenues rose by 25% to $4.22bn, or $100m more than analysts expected. The internet search leader followed Apple and IBM in bucking the trend of recession-hit technology earnings. See separate report on Sony's new 'shokku' and FT Alphaville's take on' Sir Howard's way'. See this article online.
http://ftalphaville.ft.com/blog/2009/01/23/51575/day-of-gloom-for-tec
| Samsung reports first-ever quarterly loss Samsung Electronics, South Korea's biggest company worth around $48bn, posted its first-ever quarterly net and operating losses as its core memory chip and display units battled diving prices, and the technology giant faces yet more pain as the global slowdown saps demand, reports Reuters. The world's top maker of memory chips and LCDs has been battered by a lengthy downturn in the memory market and a rapid margin drop in flat screens, along with slowing sales of all consumer electronics. Samsung shares fell 3.5% in Seoul on Friday. See this article online.
http://ftalphaville.ft.com/blog/2009/01/23/51574/samsung-reports-firs
| Turquoise secure after fundraising Turquoise, the share trading platform launched four months ago, has raised enough money in a recent round of funding to secure its financial position for the rest of the year, the company said Wednesday. The disclosure comes against a background of growing concern that the sharp downturn in equity trading volumes could make it difficult for the handful of "multilateral trading facilities" (MTFs) such as Turquoise to reach their planned break-even targets. Turquoise's rival Chi-X, which recently completed a £15m fundraising, will today start offering trading in all 35 constituents in the Spanish Ibex index. See this article online.
http://ftalphaville.ft.com/blog/2009/01/23/51573/turquoise-secure-aft
| Lazard to review Debenham's £900m debt Debenhams has appointed Lazard as financial adviser with a brief to revise the indebted UK department store chain's capital structure. Lazard will consider a potential equity raising, covenant waiver and renegotiating the maturity of the debt beyond the existing 2011 repayment deadline. The retailer has about £900m of debt and is expected to make £240m in ebitda this year. A £100m debt repayment is due in April and Debenhams has said it has the money in the bank. About 60% of its £1.1bn debt facility had been held by four banks – RBS, HBOS, Lloyds TSB and Barclays – but with the merger of Lloyds and HBOS it had been thought less likely existing lending commitments would be maintained at current levels. See this article online.
http://ftalphaville.ft.com/blog/2009/01/23/51572/lazard-to-review-deb
| Barclays executive uses stake as collateral A top Barclays executives borrowed against his stake in the bank in order to fund a £952,000 share purchase just before the credit crisis started, it emerged Thursday. Frits Seegers, chief executive of Barclays' retail and commercial division, has pledged almost all his 900,000 Barclays shares as collateral for the loan. However, the shares have fallen 60% in the past month. Seegers, a Dutchman who joined Barclays in July 2006, is the latest executive to be revealed as having borrowed against his shares since David Ross, of Carphone Warehouse, triggered a review of the rules after last month failing to disclose he had put up his stake in the company against loans. See this article online.
http://ftalphaville.ft.com/blog/2009/01/23/51571/barclays-executive-u
| St James's recruits new partners Sales of long-term savings products at St James's Place, the upmarket UK wealth management group, fell 2% last year, as the financial turmoil took its toll on its wealthy customers. But St James's said it was able to increase its dedicated network of self-employed financial advisers, known as "partners", amid the downturn in City jobs. St James's said the number or partners, seen as a key indicator of future growth, rose 7% to 1,340. The firm has also set up a special academy to train new partners, and for the past year has been targeting City workers. See this article online.
http://ftalphaville.ft.com/blog/2009/01/23/51570/st-jamess-recruits-n
| Veteran Citi directors to go in shake-up Citigroup is to revamp its board with the departure of long-standing members Kenneth Derr and Franklin Thomas following criticism of its ability to supervise the troubled company's executives and strategy. Derr, a former chief executive of the oil group Chevron, and Thomas, who used to run the Ford Foundation, have been on the board of Citi and its predecessor companies for a combined 59 years . They could announce their retirements next month when Citi schedules its annual shareholder meeting, insiders said. Their departures will give new chairman Dick Parsons a chance to strengthen the board and improve its governance. See this article online.
http://ftalphaville.ft.com/blog/2009/01/23/51569/veteran-citi-directo
| Overnight markets: Down Asian stocks fell Friday, led by technology companies and commodity producers, after Sony forecast its first annual loss in 14 years and economists predicted China's economy will slow further. Wall Street led the equity market declines on Thursday as government bonds also came under further selling pressure. Crude oil futures meanwhile dropped 1.8% in after- hours NY trading, taking its slump in the past year to 51%. Asian markets (Fri)
05:25am GMT
Nikkei down 245.75 (- 3.05%) to 7,805.99
Topix down 245.75 (-2.30%) 777.62
Hang Seng down 24.12 (-0.19%) at 12,633.87 US markets (Thurs)
DJIA down 105.30 (-1.28%) at 8,122.80
Nasdaq down 41.58 (-2.76%) at 1,465.49
S&P500 down 12.74 (-1.52%) at 827.50 European markets (Thurs)
FTSE100 down 7.65 (-0.19%) at 4,052.23
Eurofirst 300 down 6.36 (-0.83%) at 762.79 Currencies
05:28 GMT
€/$ 1.2940 (1.3018)
$/¥ 89.61 (89.13)
£/$ 1.3772 (1.3929) Commodities
05:29 GMT
Brent Crude (Mar09) down $0.10 at $45.38
Light Crude (Mar09) down $0.63 at $43.04
100 Oz Gold (Feb09) down $2.00 at $856.80
Copper (Mar09) up 15.00 at $3,125.00 10-year government bond yields (%)
US 2.58 (2.53)
UK 3.50 (3.43)
Germany 3.09 (2.99)
Japan 1.24 (1.23) Sources: FT, Reuters See this article online.
http://ftalphaville.ft.com/blog/2009/01/23/51568/overnight-markets-do
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