Storm erupts over BofA's Merrill deal The circumstances surrounding Bank of America's controversial takeover of Merrill Lynch on Thursday sparked an unprecedented public dispute involving the bank's embattled CEO, Ken Lewis, and top officials past and present. The furore erupted when Andrew Cuomo, New York attorney-general, released documents raising fresh questions over Lewis's failure to tell investors about huge losses at Merrill ahead of the acquisition. Cuomo said Lewis told his officials he was forced to complete the deal after then-Treasury Secretary Hank Paulson – citing fears of systemic risk – threatened to have him and his board fired if they pulled out. See this article online.
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First test for US toxic asset plan The Obama administration will on Friday get the first indication of investor interest in its $1,000bn toxic assets plan amid fears that the threat of government intervention and banks' reluctance to sell will deter fund managers from participating. Applications to become one of the five asset managers charged with raising funds to buy mortgage-backed securities from banks are due Friday and groups including BlackRock, Pimco and BoNY Mellon are set to apply. See this article online.
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Fiat pursues GM Europe stake Fiat on Thursday signalled its interest in taking a stake in GM's European business as it rushes to agree an alliance with GM's rival, Chrysler. The Italian carmaker is among up to seven contenders for a stake in GM Europe, of which Germany's Opel forms the largest part and which includes the UK's Vauxhall. News of Fiat's interest comes six days ahead of a US government-set deadline for Chrysler to present a viable business strategy or face bankruptcy. See this article online.
http://ftalphaville.ft.com/blog/2009/04/24/55070/fiat-pursues-gm-euro
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Microsoft sees first fall in revenue Microsoft's revenues fell for the first time in its 34-year history in the first quarter of this year, bringing an end to one of the most dramatic uninterrupted growth stories in modern business, according to figures issued Thursday. Microsoft also predicted a downbeat period ahead, dashing hopes raised by some other tech companies that the worst of the global downturn had passed. Microsoft's revenues fell 6% in the latest quarter to $13.65bn, some $500m below analysts' expectations. The biggest declines came in the PC operating system business and the internet division. See this article online.
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Barclays to raise loans by £11bn Barclays promised to increase loans to customers by £11bn this year - a 6% increase on its loan book at the end of 2008 - at the bank's annual meeting on Thursday, at which shareholders criticised the board's decision to seek investment from the Middle East. In signs of ongoing investor dissent, a significant minority of shareholders – representing more than 16% of total shares voted – opposed the reappointment of Marcus Agius, the bank's chairman. Separately, the FT reports that Barclays' largest shareholder, Qatar Holding, has cut its stake in bank to 5.8% from 6.4%. See this article online.
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Mizuho warns of $5.9bn net loss Mizuho Financial Group, Japan's second largest bank, on Thursday warned it would report a full-year loss of Y580bn ($5.9bn) rather than a profit of Y100bn in the year to March 2009. The news came after third-ranked SMFG revised its full-year figures from a Y180bn profit to a Y390bn loss. Analysts expect MUFG, Japan's largest bank, to also cut its forecast. Nomura Securities, Japan's largest broker, is also expected to report a substantial loss when it reports Friday. See this article online.
http://ftalphaville.ft.com/blog/2009/04/24/55068/mizuho-warns-of-59bn
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Credit Suisse returns to profit Credit Suisse surprised investors on Thursday with a sharp move into profit in the first quarter as private banking earnings remained robust. The net profits of SFr2bn ($2.6bn) followed positive earnings at many US rivals and pointed to a thaw in frozen credit markets. However, Credit Suisse's performance contrasted with the SFr2bn Q1 loss revealed last week by rival UBS ahead of its full results. See this article online.
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SEC to end broker vote rule America's SEC plans to toss out decades-old rules in a move that will give activist investors significantly more power to determine who sits on corporate boards, reports the WSJ. The change centres on a rule that has allowed brokers since 1937 to vote on their clients' behalf in director elections, and to typically vote in favour of standing managements and boards. The SEC could announce as early as next week that from January, brokers will not be able to vote clients' shares. See this article online.
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Gilts fall on growth worries Gilts prices fell for a second consecutive day on Thursday amid growing concern over the UK's rising debt levels. Investors took fright after the government's annual Budget on Wednesday revealed that borrowing would soar in coming years, with a debt to GDP ratio approaching 80% from today's 50%. Investors also questioned the credibility of the government's growth forecasts, which are far more optimistic than IMF estimates. Benchmark 10-year gilt yields have risen about a quarter of a point since the Budget. See this article online.
http://ftalphaville.ft.com/blog/2009/04/24/55065/gilts-fall-on-growth
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Pound weakens on UK rating fears The pound fell against the dollar and the yen after a news report that credit ratings agencies Moody's and S&P are reviewing the UK's AAA credit rating on concern about the UK's rising debt burden, reports Bloomberg. The Daily Telegraph quoted Moody's lead analyst saying that the UK Treasury's projections that public sector net borrowing will remain above 5% of GDP five years from now "are a cause for concern", and cited bond market sources saying that credit agencies were "already stress-testing the UK again for a possible downgrade". See this article online.
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Northern Rock heads for large loss Northern Rock has predicted it will be "substantially loss-making" in 2009, in large part due to higher provisioning against bad loans. The lender, which was nationalised last year, said on Thursday that 3.67% of its residential mortgage loans had now been in arrears for more than three months, an increase from 2.92% at end-2008. But in its first quarter trading statement, it also noted "tentative" signs of improvement in the trend for arrears of less than three months. See this article online.
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Brussels eyes cap on bank bonuses Bankers' bonuses and golden parachutes would be capped in all EU countries under a draft policy circulating in Brussels. The European Commission recommendations, seen by the FT, include asking the 27 EU countries to adopt tougher remuneration rules for financial institutions with an office within their borders, covering all staff whose activities affect the firm's risk profile. The rules would also apply to subsidiaries of EU-based parents, including in offshore centres. See this article online.
http://ftalphaville.ft.com/blog/2009/04/24/55063/brussels-eyes-cap-on
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Hennessee fined over Bayou fraud Hennessee Group, which advised clients to invest in the Bayou hedge funds that were later discovered to be fraudulent, has agreed to pay $814,644 in fines to settle charges that it failed to properly investigate the funds. The SEC on Thursday charged Hennessee and its principal, Charles Gradante, with violating securities laws by failing to perform their advertised review and analysis before recommending clients to invest in the Bayou fund. See this article online.
http://ftalphaville.ft.com/blog/2009/04/24/55062/hennessee-fined-over
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City exodus feared over tax rate Commentators and figures in London's City financial centre warned UK chancellor Alistair Darling on Thursday that his new 50% income tax rate would drive financial talent from the City and discourage entrepreneurs. But early polls suggest that tax increases contained in the chancellor's 2009 Budget, presented this week, have tapped into rising public hostility towards the rich. See this article online.
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Overnight markets: Mixed Asian stocks were mixed, as gains by financial companies helped off-set concern that the global recession is hurting earnings. Futures on the S&P 500 Index lost 0.4% after the gauge rose 1% as better-than-expected earnings at companies from Marriott International to ConocoPhillips and EBay eclipsed falling home sales and higher jobless claims. Asian markets (Fri)
03:00 BST
Nikkei down 29.05 (-0.33%) at 8,817.96
Topix down 1.70 (-0.21%) at 837.78
Hang Seng up 119.25 (0.78%) at 15,333.71 US markets (Thurs)
S&P500 up 8.37 (0.99%) at 851.92
DJIA up 70.49 (0.89%) at 7,957.06
Nasdaq up 6.09 (0.37%) at 1,652.21 European markets (Thurs)
FTSE100 down 12.43 (-0.31%) at 4,018.23
Eurofirst 300 down 3.29 (-0.41%) at 791.95 Currencies
04:10 BST
€/$ 1.3144 ( 1.2985)
$/¥ 97.24 (97.75)
£/$ 1.4669 (1.4456) Commodities
04:05 BST
Brent Crude (ICE) down $0.41 at $49.70
Light Crude (Nymex) down $0.34 at $49.28
100 Oz Gold (Comex) down $0.50 at $906.10
Copper (Comex) down $0.25 at $198.95 10-year government bond yields (%)
03:50 BST
US 2.93 (2.93)
UK 3.51 ( 3.45)
Germany 3.16 ( 3.20)
Japan 1.42 (1.42) Sources: FT, Bloomberg See this article online.
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