The Wall Street Job Report

I.M.F. Calls for Overhaul of Financial System

By CARTER DOUGHERTY for the New York Times,  September 30, 2009

The International Monetary Fund said Wednesday that “the global economy has turned a corner” after the harrowing start to 2009 but that only a thorough restructuring of the financial system could prevent a return to crisis and pave the way for solid growth within the next 18 months.

In its Global Financial Stability Report, an assessment that has brought widespread praise from economists as a thorough analysis of the system’s health, the I.M.F. praised the mixture of bank rescue and stimulus packages. But it said the policies had not changed the fundamental dynamic by which debt-burdened banks and consumers drag on economic growth.

“The risk of a reintensification of the adverse feedback loop between the real and financial sectors remains significant as long as banks remain under strain and households and financial institutions need to reduce leverage,” the I.M.F. wrote in its Global Financial Stability Report.

To head off a new chapter in the crisis, the I.M.F. called on governments to strengthen bank capital and establish effective policies to clear bad loans off bank balance sheets. It also called for “great care” in winding down crisis-driven rescue policies to avoid bringing on a new crisis.

Broadly speaking, the I.M.F. said the global economy still suffered from a shortage of credit, thanks to the crisis at the heart of the Western financial system that stemmed initially from huge losses linked to the U.S. housing market. Now, loan write-offs linked to a searing recession are amplifying the problem.

“When set against projected demand for credit by the public and private sectors,” the I.M.F. wrote, it appears that forecast supply could “fall short of even anemic private sector demand.”

Having shouldered losses of $1.3 trillion to date, the I.M.F. estimated, banks still had to write off $1.5 trillion in bad loans or worthless securities. It said that U.S. banks were about 60 percent through the process of writing off bad investments. European banks, because the economic cycle in Europe lags behind that of the United States, are about 40 percent finished, it said.

Even though banks are returning to profitability, the I.M.F. said, incoming cash will not be enough to compensate for the losses. So, it said, banks will still need new capital infusions, obtained either by raising it in private markets or by tapping government bailout plans.

The I.M.F. painted a marginally flattering picture of U.S. policies toward the banking system, saying that “stress tests” and subsequent capital-raising by big banks had helped stabilize the system.

It estimated that banks in the 16-nation euro area still needed to raise $380 billion to put their Tier 1 capital ratio, a measure of bank reserves, at 10 percent. U.S. banks, by contrast, would need about $80 billion.

In Europe, “banks exceed minimum capital levels, but would benefit from additional tangible capital to better absorb impending losses and revive lending,” the I.M.F. wrote.

The report cited rapid deterioration of the commercial real estate market as one reason why American banks were not out of the woods yet. It said that about 12 percent of U.S. banks had exposures to commercial real estate loans amounting to five times their capital on hand, “posing a significant threat to their solvency.”

The I.M.F. criticized the pace of efforts on both sides of the Atlantic to clear bank balance sheets of bad assets. In the United States, a system by which private investors buy bad assets at a discount with government-backed loans has yet to attract any takers, while European programs are either incomplete or inadequate, the fund said.

 

Deutsche Bank ready for arbitration with Kirch

By Philipp Halstrick for Reuters, September 30, 2009

Deutsche Bank  is ready in principle to enter arbitration with media mogul Leo Kirch, it said on Wednesday, potentially setting the stage for resolving one of corporate Germany's most bitter disputes.

Kirch, who is seeking billions of euros in compensation from Germany's largest lender, which he blames for the collapse of his business empire, this month agreed to a request made by a Munich court to take part in arbitration.

Deutsche Bank, which has not yet responded to the request, on Wednesday said it is "ready in principle" to hold such talks. But details over when they should take place remain unclear, a spokesman for the bank said.

A spokesman for Kirch said a precondition for arbitration talks would be that they take part at senior management level.

Deutsche said it wanted to enter such talks "without preconditions", adding that it remained confident it could win a case against Kirch should legal proceedings continue.

Arbitration would seek to resolve a legal dispute surrounding PrintBeteiligungs GmbH, one of Kirch's main companies.

Kirch is seeking billions of euros in damages from Deutsche Bank and former Chairman Rolf Breuer, alleging a statement Breuer made to Bloomberg Television on Feb. 2, 2002 regarding the Kirch Group breached laws and caused financial damage.

Kirch has launched lawsuits in the United States and in several different courts in Germany seeking to recoup some of his losses.

At 1058 GMT, Deutsche Bank shares were down 1.5 percent, against a European banking sector .SX7P that rose 0.15 percent.

 

Macquarie Group to Buy Fox-Pitt Kelton for About $146.7 Million

By Josh Fineman for Bloomberg, September 30, 2009

Macquarie Group Ltd., Australia’s largest investment bank, agreed to buy Fox-Pitt Kelton Cochran Caronia Waller LLC, a investment bank focused on financial services, for about $146.7 million.

The purchase is expected to close in the fourth quarter, Sydney-based Macquarie said in a statement today. The price includes $130 million in equity value and $16.7 million in long- term debt.

Citigroup Sells Colombia Pension Fund To Private Equity Funds

By the Dow Jones Newswires, September 30, 2009

Citigroup SA (C) Tuesday said it reached an agreement to sell its Colombian pension fund Citi Colfondos to a group of private equity funds.

Francisco Aristiguieta, Citigroup's top executive for Colombia and the Andean region, said in a statement the sale is part of Citigroup's general plan established in January to focus on the company's core business and making value from the sale of non-core assets.

"The transaction is not expected to have a material impact on Citi's net income," the statement said.

The companies didn't disclose the cost of the operation.

The group of buyers is led by local, closely held investment firm Grupo Colpatria SA, New York-based equity fund Palmfund Management LLC and private equity fund Linzor Capital Partners.

Colpatria controls Colombian bank Banco Colpatria Red Multibanca SA (COLPATRIA.BO).

The transaction is expected to close in the fourth quarter and is subject to the approval of the local market regulator.

Citi Colfondos is Colombia's fourth largest pension funds with assets worth $5.6 billion and 2.1 million customers. Citigroup bought a minority stake in Citi Colfondos in 1994 and secured 100% of the fund in 2006.

 

Hartford Names Former BofA Exec as New CEO

By THE ASSOCIATED PRESS.  September 29, 2009

Life insurer The Hartford Financial Services Group Inc. on Tuesday named Liam E. McGee, the former head of consumer banking at Bank of America, as its new chairman and CEO.

The 55-year-old McGee succeeds Ramani Ayer, who announced his plans to retire this summer. McGee will take the helm on Oct. 1 and Ayer will depart after a month-long transition period.

McGee left Bank of America Corp. in August after a nearly 20-year career, as CEO Ken Lewis shuffled his management team under pressure from shareholders and the U.S. government in the wake of receiving $45 billion in federal bailout aid. In addition to serving as president of the Charlotte, N.C.-based bank's core consumer and small business banking operations, McGee oversaw BofA's global technology and delivery in more than 30 countries and had been seen as a possible successor to Lewis.

At the time, McGee said he was leaving to pursue his goal of ''running a company.'' McGee and his family will relocate to the greater Hartford area.

The change in leadership comes as insurers have seen their investment portfolios slammed by steep drops in stocks, real estate and other financial assets.

Earlier this year, Hartford Financial posted a $1.2 billion first-quarter loss and suspended sales of annuities in Japan and the U.K. in a move to cut costs. At the time, Ayer said Hartford Financial was taking steps to preserve capital, reduce risk and stabilize ratings.

At the company's annual meeting in May, Ayer defended his Hartford Financial's response to the recession. He announced his retirement in June.

Hartford Financial is one of six life insurers that were approved by the government to tap its $700 billion bailout program. The company received $3.4 billion in funds in late June.

Shares of Hartford Financial fell $1.18, or 4 percent, to close at $27.44 before the announcement. They were down a penny after-hours.

McGee was born in Ireland but grew up in Southern California and speaks Spanish fluently. He graduated from the University of San Diego and got his MBA from Pepperdine University. He also has a law degree from Loyola Law School, according to Hartford Financial.

 

CIT Group Again on Brink of Collapse

By RICHARD BEALES for the Associated Press, September 29, 2009

Overregulating of credit ratings might just have a happy ending.

With rating firms under pressure from policy makers for their failures over complex structured finance ratings, there must be a tipping point at which they would give up their officially sanctioned status to escape the burdens any changes could bring. If that led to no government involvement in ratings and no reference to ratings in laws, the financial world could be a better place.

The Securities and Exchange Commission already approves nationally recognized statistical ratings organizations and is contemplating tightening oversight and regulation further — maybe even making the likes of Moody’s, Standard & Poor’s and Fitch Ratings financially liable for rating errors.

Congress is in the game too, with new draft credit rating legislation circulated last week and two hearings set for Wednesday, one called by the House Oversight Committee, led by Representative Edolphus Towns, Democrat of New York, and one by a House financial services subcommittee. Even the National Association of Insurance Commissioners is taking an interest, because insurance watchdogs also use the rating firms’ credit assessments.

The badge that comes with being nationally recognized goes alongside references to ratings in laws and regulations. Some of the specifics are unique to the United States, but the overall picture is similar elsewhere. The Treasury and others have said that officials globally should work to reduce government and investor reliance on credit ratings. But the moves toward tighter regulation suggest authorities aren’t ready to cleanse the system of ratings just yet.

But it’s just possible to imagine that the big rating firms may do it themselves if they are allowed to, despite the help that the S.E.C.’s seal of approval has given to the market positions, and the profitability, of the big rating firms over the years. For example, if Congress were to approve ideas in the latest draft legislation that insist that raters shoulder significant liability for ratings that turned out badly, or tried to legislate the criteria that rating firms use, that might just drive them to forgo the privileged status of being nationally recognized to avoid the weight of the associated shackles.

If rating firms did decide to try their luck simply as individual, if initially influential, voices in a cacophony of recommendations — more or less how the stock research industry works — it would greatly change the finance world.

For sure, ripping officially sanctioned ratings out of entrenched laws and regulations would be a wrenching process. But the potential upsides are many.

Investors would have to do their own work rather than rely on ratings. As a result they might not buy overly complex products at all. If they had operated on that basis a few years back, the indecipherable instruments that characterized the recent credit boom might well have received a much more skeptical reception.

More credit researchers would potentially compete, validating or challenging one another’s work. The problem of incomplete public disclosure, which regulators are to some extent trying to tackle, could fade because there would be less incentive for debt issuers to favor a small group of rating firms with privileged access to information.

Even the idea that rating firms should not be punished for errors, a tricky sell when they operate with government approval, would suddenly make more sense. And the debate over raters’ conflicts of interest would die down, because investors would be free to choose the credit research they found most useful, whatever the source and whoever initiated it.

There would be a further advantage in that lawmakers would not feel the need to dictate to rating firms how to go about their business. That’s already getting out of hand. The latest draft legislation is unlikely to survive intact, but CreditSights, an independent research firm, reckons aspects of it are “borderline surreal” and that over all it is too focused on allocating blame for the crisis rather than improving the system for the future.

Perhaps best of all, removing all official recognition and regulation of ratings would free up time and money for regulators around the world, allowing them to focus on more important things.

Of course, this whole situation is hypothetical. And moving toward it would involve a huge and costly transition, including the tricky job of ensuring that the big rating firms’ outsize influence didn’t somehow persist. Nonetheless, it’s one example of how less regulation might end up being better regulation. Sadly, that’s why interventionist policy makers are likely to stop short of letting it happen.

 

JPMorgan Picks Staley to Run Investment Unit

By ERIC DASH for the New York Times,  September 29, 2009

James E. Staley was named head of investment banking at JPMorgan Chase on Tuesday, potentially putting him in line to succeed the bank’s chairman and chief executive, Jamie Dimon.

The unexpected appointment was part of the most significant management shake-up since Mr. Dimon took the reins of the bank in 2004. It comes as JPMorgan is emerging from the financial crisis as one of the most formidable forces in American finance.

Among the losers in the move was William T. Winters, a co-head of investment banking who was seen as the other leading candidate for the top job. With Mr. Staley ascendant, Mr. Winters will leave the bank. Steven D. Black, the other co-head of the investment bank, will stay through 2010 in a transitional role as the unit’s executive chairman.

Mr. Dimon, 53, has no immediate plans to retire. Indeed, his power and influence are growing, both on Wall Street and in Washington.

But both he and his fellow board members were eager to make plain the line of succession. Many other big banks have reshuffled their leadership in the last year. And then Mr. Black, who headed investment banking with Mr. Winters, expressed an interest in retiring, adding to the sense of urgency.

To run the investment bank and, possibly, all of JPMorgan, Mr. Dimon chose Mr. Staley, who successfully ran the bank’s asset management and private banking group for the last decade.

“Bill is an absolute exceptional individual professionally and personally,” Mr. Dimon said Tuesday. “He clearly could run an investment bank or a company. I had to make a decision.”

Mr. Winters’s departure stunned many insiders. Some JPMorgan bankers speculated that tension between Mr. Black and Mr. Winters prompted Mr. Dimon to act, but Mr. Dimon downplayed such talk Tuesday.

Mr. Staley is not a shoo-in for the chief executive office. The most immediate candidates are longtime executives like Mr. Staley and Mr. Black. But a second group of younger executives like Michael J. Cavanagh, 42, the chief financial officer, and Charles W. Scharf, 44, the head of the Chase retail banking, may also be in the running down the road.

Mr. Staley’s elevation enables Mary Callahan Erdoes, 42, a rising star in the private bank, to take over as head of asset management. She will become the third woman on the bank’s 15-member committee of top executives and also a potential successor in the future.

The shake-up will ultimately make Mr. Staley the sole head JPMorgan’s investment bank, one of the company’s biggest and most prestigious businesses. The unit steered clear of the troubles that ravaged some of its competitors during the financial crisis.

Despite talk of tension between Mr. Winters and Mr. Black, the executives had tried to make their partnership work. Mr. Black, one of Mr. Dimon’s most loyal and decisive lieutenants, oversaw the company’s banking activities from New York. Mr. Winters, an articulate and cerebral leader, ran the bank’s trading operations from London and kept a distance from colleagues.

Whereas some JPMorgan executives enjoy one another’s company so much that they take family vacations together, Mr. Winters was viewed as an outsider in Mr. Dimon’s close-knit group.

Mr. Staley, a company lifer who had not been part of Mr. Dimon’s inner circle, struck up a close relationship with his boss and impressed him with strong results.

 

Ameriprise to Buy Bank of America’s Columbia Stock, Bond Funds

By Christopher Condon and Sree Vidya Bhaktavatsalam for Bloomberg, September 30, 2009

Ameriprise Financial Inc. agreed to buy the Columbia stock and bond funds from Bank of America Corp. for as much as $1.2 billion in cash, the biggest purchase by the investment and insurance company since its spinoff from American Express Co.

The acquisition will add $165 billion in funds, bringing Ameriprise’s assets under management to almost $400 billion, the Minneapolis-based company said today in a statement. The deal doesn’t include Columbia’s money-market funds, which managed $120.2 billion as of July 31.

Bank of America, which has received $45 billion in federal bailout money, including aid to Merrill Lynch & Co., was ordered by U.S. regulators in May to raise more capital as a cushion against potential losses on loans and investments. Ameriprise has sought to expand its money-management business, which includes the RiverSource and Threadneedle funds, since being spun off from credit-card issuer American Express in 2005. It bought fund manager J&W Seligman & Co. last year for $440 million, adding $18 billion in assets.

“It will help them expand distribution, not only of the Columbia funds, but also the RiverSource funds through the connection to Merrill Lynch,” Burton Greenwald, an independent mutual-fund consultant in Philadelphia, said in an interview.

Bank of America became the largest brokerage in the world when it bought Merrill Lynch on Jan. 1, with more than 20,000 advisers, according to the company.

Ameriprise, whose television advertisements feature actor Dennis Hopper pitching retirement products, managed $285 billion as of June 30, including $135 billion at RiverSource Investments LLC and $82 billion at London-based Threadneedle Asset Management Co. RiverSource, based in Minneapolis, runs the $4.6 billion Riversource Diversified Equity Income Fund and the $4.1 billion Diversified Bond Fund.

Acorn Fund

Columbia Management Group LLC, Bank of America’s Boston- based investment unit, had about $204 billion of client assets as of June 30, excluding money-market funds. It runs the $10.1 billion Acorn Fund, managed by Charles McQuaid, which returned 31 percent this year through Sept. 15. That beat 72 percent of funds that also target companies of all sizes expected to show higher-than-average profit growth, according to data compiled by Bloomberg.

Columbia was the ninth-largest U.S. manager of money-market funds as of July 31, according to Crane Data LLC in Westborough, Massachusetts.

Columbia’s funds, divided into broad investing categories, on average beat 53 percent of their peers in the three years ended Sept. 11 Funds that invest in both stocks and bonds performed best, beating 68 percent of balanced funds at other asset managers, according to Morningstar data. The firm’s domestic stock funds beat 53 percent of peers. Taxable bond funds did worst, beating 44 percent rivals.

U.S. regulators in May ordered Charlotte, North Carolina- based Bank of America to raise $33.9 billion after the so-called stress test review of 19 top financial institutions to gauge their ability to withstand a prolonged recession. The bank had already raised $38 billion in capital, including $13.5 billion from a share offering, $9.5 billion by swapping preferred stock for common shares and $4 billion selling stock in China Construction Bank Corp.

 

Watchdogs focus on banks’ dark pools

By Jeremy Grant for the Financial Times, September 28, 2009

Dark pools operated by banks should improve pre and post-trade transparency and should operate under a more formal structure, the head of Europe’s umbrella group for securities regulators has said.

The comments, by Eddy Wymeersch, chairman of the Committee of European Securities Regulators, are the first by a top regulator since a spat has developed between the banks and some of Europe’s biggest exchanges over the bank’s “crossing networks”, a type of dark pool. Dark pools allow the matching of large blocks of shares without prices being revealed until after trades are completed.

Regulators on both sides of the Atlantic are studying them amid questions over their transparency.

The Federation of European Exchanges last week wrote to CESR saying crossing networks were not properly registered under rules laid out by the Markets in Financial Instruments Directive.

Mifid launched competition in European share trading in 2007, leading to an explosion of new type of trading venues, including so-called “multilateral trading facilities”.

FESE claimed that banks’ dark pools were “unregulated venues” operating with “full opacity”.

Mr Wymeersch said bank dark pools should “at least have post-trade transparency and also, if possible, have pre-trade transparency. They should organise themselves as MTFs, or something similar”.

“It’s a question of reliability of valuation in the entire system,” Mr Wymeersch told the Financial Times at a European Commission conference on over-the-counter derivatives in Brussels.

He said he was “concerned” at the amount of off-exchange equities trading that takes place on crossing networks.

The banks say the reporting of post-trade prices for dark pools needs reform but crossing networks offer a legitimate form of trading that helps achieve the best prices for investors for certain sizes of trades.

 

'Twilight' express: studio hires Morgan to take a bite on H'wood deals

By PETER LAURIA for The New York Post, September 29, 2009

Summit Entertainment, the film studio behind the "Twilight" franchise, is prowling for deals.

The studio is about to put Morgan Stanley on retainer to help it sniff out growth opportunities -- which could include making a run at Metro-Goldwyn-Mayer or The Weinstein Co., The Post has learned.

Summit's move comes as Hollywood braces itself for a consolidation wave stemming from financial belt-tightening at the conglomerates that own the major studios, Disney's recent $4 billion buy of Marvel Entertainment, and restructuring initiatives at MGM and TWC.

Summit, according to a source close to the situation, believes Morgan Stanley is in a position of relative strength and can be "aggressively opportunistic" regarding deals.

A second source said that Stuart Epstein, global head of Morgan Stanley's media mergers and acquisitions group, would be Summit's point person at the bank.

Epstein and representatives for Summit could not be reached for comment.

According to both sources, Morgan Stanley's mandate is to find ways for Summit to expand. That could be achieved in many ways, including raising more funding, bringing in a financial partner to recapitalize the studio or through mergers and buys.

But strategic purchases are likely to play a big part in Summit's plans, with MGM, TWC, and Lionsgate mentioned as possible targets on the studio side. MGM and TWC have huge debt loads and tiny cash flow, which makes them vulnerable to takeover, and TWC is purging a few dozen employees.

Lionsgate, meanwhile, is dealing with activist investor Carl Icahn and is considered too small to be a standalone, publicly traded studio.

Summit is also likely to pursue smaller deals for film library assets or overseas independent production companies, these sources said. The studio, which was formed in April 2007 and has access to more than $1 billion in funding from Merrill Lynch and a consortium of investors, could also build or buy its way into television and online-content production. Summit already has an output deal for its movies in place with Showtime.

Known primarily as a seller of international distribution rights, Summit gained notoriety on the production side by scooping up the rights to Stephenie Meyer's teenage vampire series, "Twilight," after Viacom's Paramount Pictures relinquished them.

The first Twilight movie, which cost only $37 million to make, grossed nearly $400 million at the worldwide box office and made teen idols out of stars Robert Pattinson and Kristen Stewart.

Industry observers estimate that Twilight-related consumer products, excluding books, generated nearly $500 million in revenue worldwide, of which Summit receives a high single- to low double-digit percentage.

The second installment in the Twilight franchise, "New Moon," opens on Nov. 20. The third, "Eclipse," will be released in June 2010.

Summit is more than the "Twilight" franchise, however. The studio scored a hit with the sci-fi movie "Knowing," which grossed $155 million worldwide on a production budget of $58 million. Another Summit production, "The Hurt Locker," is being talked about as an awards contender and the first film in the studio's reinvention of the cult series "Highlander" is on track for a 2011 release.

 

LSE Hires Morgan Stanley, Barclays Capital as New M&A Bankers

By Ambereen Choudhury and Nandini Sukumar for Bloomberg, September 29, 2009

London Stock Exchange Group Plc, Europe’s oldest independent bourse, hired Morgan Stanley and Barclays Capital to replace Bank of America-Merrill Lynch as its adviser on mergers and acquisitions, four months after Xavier Rolet took over as chief executive officer.

JPMorgan Cazenove Ltd. and Nomura Holdings Inc. will remain corporate brokers to the exchange, LSE spokesman Patrick Humphris said today, declining to comment further. Bank of America Corp.’s Merrill Lynch unit has advised the London-based company since 2002.

Former LSE CEO Clara Furse and Merrill Lynch fought off five takeover offers from 2004 to 2006, before buying the operator of the Milan stock exchange the following year. LSE rejected bids from companies including Frankfurt-based rival Deutsche Boerse AG, Euronext NV, Australia’s Macquarie Group and Nasdaq OMX Group Inc. On Sept. 16, LSE shares climbed the most in almost five months in London trading on speculation Deutsche Boerse may renew its takeover interest.

Rolet, 49, succeeded Furse in May as head of Europe’s largest exchange by value of companies listed. The executive, head of Lehman Brothers Holdings Inc. in France until last year, has cut 12 percent of jobs, agreed to buy Sri Lanka’s MillenniumIT to gain a new trading system, appointed a new chief executive officer of LSE’s fixed-income unit, MTS SpA, and changed the way LSE charges for trading.

“All avenues are open, all avenues are considered,” Rolet said on Feb. 13, the day his appointment was announced, when asked about consolidation. “We wouldn’t be doing our jobs otherwise.”

Brokers liaise with investors on behalf of companies, and often manage stock and bond offerings.

 

London Bankers Shrug Off Short-Term Threat to Pay

By MATT TURNER for the Wall Street Journal, September 29, 2009

Bankers are confident this year's bonus round will be unaffected by the political furor over compensation levels and that efforts by the Group of 20 industrial and developing nations to clamp down on pay will take effect from 2010 at the earliest, according to a poll by recruitment Web site eFinancialCareers.com.

The survey, which polled the views of 465 financial-services professionals based in London, found 88% believe any potential impact would only become apparent in the 2010 bonus round or beyond.

The G-20 countries agreed on broad principles on pay over the weekend, including increasing the amounts to be paid in shares rather than cash and an end to multiyear guaranteed bonuses.

While 79% of respondents felt pay would stay the same or decrease after the G-20's reforms started to have an impact, 21% thought it could still increase.

However, opinions are split on how much pay could fall. A quarter said the falls could be as large as 26% to 50%, while 15% believed the cuts would be less than 10%.

The majority (56%) said they anticipated compensation packages in the sector would fall between 10% and 25% as a result of the proposed recommendations.

The G-20 meeting in Pittsburgh drew on a report provided by the Financial Stability Board that suggested domestic regulators should have the ability to implement bonus caps. "National supervisors should limit variable compensation as a percentage of total net revenues when it is inconsistent with the maintenance of a sound capital base," the report said.

When asked which element of bonus regulations under discussion they would prefer not to be implemented, almost half of respondents, or 46%, said bonuses being capped as a percentage of salaries was the worst possible outcome.

Meanwhile, bankers are split on whether G-20 plans for reforming the financial-services sector will make the industry more stable in the future. In the survey, 53% of respondents said plans to reform banking would make the sector more stable in the future, with 47% believing they wouldn't have an impact.

"Financial professionals in London at present are split as to whether the proposed changes can make the banking system any more stable in the future," said John Benson, founder and chief executive of eFinancialCareers.com

 

Marchionne, Voser to Leave UBS's Board

By GORAN MIJUK for The Wall Street Journal, September 29, 2009

UBS AG Tuesday said that board members Sergio Marchionne and Peter Voser will leave the bank next year, citing the two managers' busy schedules at their own companies.

UBS said that Mr. Marchionne, who is also Fiat SpA's chief executive, and Mr. Voser, CEO of Royal Dutch Shell PLC, both want to focus on their current demanding management positions.

UBS's next annual general meeting is scheduled April 14, 2010. No replacement has been announced. Neither man was available for comment.

Analysts said the two managers' resignation was partly expected as UBS's most pressing problems have been solved during the past few months.

In addition, analysts said both executives face difficult challenges at their own companies as the global recession has hit both the car and oil industry.

Mr. Marchionne, who took over the CEO post at Chrysler in June after Fiat bought a 20% stake in the firm, is struggling to turn around the ailing U.S. car producer.

Mr. Voser, meanwhile, who took over the CEO post at Shell in July, is orchestrating a major revamp at the Anglo-Dutch oil giant that includes job and cost cuts.

Mr. Marchionne, a 57-year-old Canadian and Italian citizen, was elected to UBS's board in 2007 and was long expected to become chairman after the bank was hit by massive write-downs during the financial crisis.

UBS had to write down around $50 billion in assets during the subprime crisis and needed to tap capital four times, including assistance from the government.

Although the bank has put most of its troubles behind, UBS is expected to suffer a net loss in 2009 because of write-downs but may turn around next year, according to analysts.

UBS itself hasn't made a specific earnings forecast. However, CEO Oswald Grübel recently said that the bank is on track to turn around.

Mr. Voser, a 51-year-old Swiss national, who helped turn around Switzerland-based electrical engineer ABB Ltd, was also regarded as a potential candidate for UBS's top job, which was recently filled by former Swiss cabinet member Kaspar Villiger.

"I would like to thank the outgoing board members Sergio Marchionne and Peter Voser for their strong contributions to the management of our firm," Mr. Villiger said.

"With their comprehensive economic and entrepreneurial competence they supported UBS in difficult times and provided significant input to the stabilization and the successful initiation of the turnaround of our company," Mr. Villiger added.

UBS said it will provide information at a later stage regarding candidates to succeed the outgoing board members.

UBS has long been criticized for its relatively weak board that under the reign of former chairman Marcel Ospel lacked banking and financial expertise.

Since Mr. Ospel's ouster in 2008, UBS has appointed several high-ranking and experienced financial experts such as former Swiss National Bank member Bruno Gehrig, former Swiss Reinsurance Co Chief Financial Officer Ann Godbehere and David Sidwell, former CFO of Morgan Stanley.

Bank Sarasin analysts Rainer Skierka said the departure of the two managers "will give UBS an opportunity to further boost sector-specific competence and quality of its board composition."

Bank Vontobel analyst Teresa Nielson, meanwhile, said that the bank is well on track to turn around under the stewardship of Messrs. Villiger and Grübel.

 

Deep Within Citi, the Death of Salomon

By DENNIS K. BERMAN for the Wall Street Journal, September 29, 2009

We have bid goodbye to Bear Stearns, Lehman Brothers and Merrill Lynch. Today it is time to offer a final farewell to a hidden Wall Street institution at the center of the financial crisis: Salomon Brothers.

Of course, the investment bank officially disappeared over a decade ago. Home to the famously rapacious and churlish, Salomon was first subsumed into Travelers Group in 1997. A year later it merged with Citibank to form what today is known as Citigroup.

So intense was the loyalty they felt to their old firm that many Citi traders continued to answer their phone "Salomon" years after the deals closed.

Over time Salomon's cutthroat culture was diluted inside Sanford Weill's financial behemoth. A few years ago, traders and bankers were told that one-third of their pay would be based on how well they cooperated with colleagues.

But as the world's credit boom intensified earlier this decade, Citi's top managers called for help from the remnants of the hard-knuckled Salomon, which helped create the market for mortgage securities.

Salomon's renowned credit desk helped push the bank into tens of billions of disastrous mortgage bets. Its investment bankers, largely Salomon veterans, piled on billions more in leveraged-buyout debts. Meanwhile, it was Salomon's commodities-trading operation, Phibro, that provided some of the only reliable profits for the Citi mothership.

Inside Citigroup, one hears dozens of explanations for the bank's near-demise. One of those posits that Citi's crisis was really a failing of cultures. In the Salomon of the past, one person, former Salomon CEO John Gutfreund, was accountable for the bank's risk-taking, personally approving trades.

But inside Citi, responsibility was spread so wide that no one actually had it. What was envisioned as a synergy a decade before -- smart traders with an access to a big bank balance sheet -- became a mortal threat.

CEO Vikram Pandit is trying to rebuild a bank suffering from low morale, government intrusion and a single-digit stock price. He will do so with an increasingly limited Salomon influence. Today, three of the people on the bank's 45-person senior leadership committee have roots at Salomon. The figure was nine in 2006. Gone are senior Salomon bankers such as Tom King, Tom Maheras, Robert Morse and Chris Varelas. The bank also is in talks with Phibro about ways the two can part ways, largely because of controversy around lead trader Andrew Hall's Salomonesque $100 million payday.

"It's gone. For better or for worse, it's gone," said Charlie Bobrinskoy, who joined Salomon in 1983 and now is vice chairman at Chicago's Ariel Capital Management.

Employees say Mr. Pandit is trying to fashion Citigroup into the image of his previous home for two decades: Morgan Stanley. That culture is still more consensus-oriented, built on loyalty to colleagues and clients. A number of them embrace the idea, but still worry about how well it will be executed. Some recall a now-moribund intiative, "Project Passion," that was meant to instill a new Citi culture just years ago.

A senior Citi executive acknowledges the company was still operating as separate fiefs when Mr. Pandit arrived. This executive said the bank has taken pains to give "a sense of people needing to work together," having finally brought together the investment bank's senior managers on to the 39th floor of its downtown Manhattan headquarters.

Yet it's still striking that a decade after Citi's formation, its employees remain puzzled about their mission and identity. Citi is "a culture without a culture," said one banker. Gone may be the Salomon legacy. But to succeed, Citigroup will have to stand for something that it is, rather than what it isn't.

 

JPMorgan Shuffles Investment Bank Management

By The New York Dealbook, September 29, 2009

JPMorgan Chase’s investment banking unit announced a series of top management changes on Monday, including the naming of a new chief executive for the unit, Jes Staley, and the departure of Bill Winters, who had been the unit’s co-chief executive for the last five years.

Steve Black, currently the investment bank’s other co-chief, will become executive chairman of the investment banking business, JPMorgan said in a press release Monday.

“With the credit crisis largely behind us and the economy recovering, the timing was right to begin the succession process,” Jamie Dimon, JPMorgan Chase’s chairman and chief executive, said in the statement, adding that Mr. Black and Mr. Staley hope to complete a “smooth transition at the end of 2010.”

Mr. Staley had been head of JPMorgan’s asset management unit since 2001. He joined the firm in 1979 and spent 20 years at the firm’s investment banking arm, JPMorgan said in Monday’s statement.

“Bill, Steve and the IB employees have helped build the leading investment bank in the world today, and I am extremely honored to be asked to take on this critical role,” Mr. Staley said in the statement.

Mary Callahan Erdoes, currently chief executive of private banking at JPMorgan, will succeed Mr. Staley as chief executive of asset management.

Mr. Winters, 48, and Mr. Black, 57, have jointly led JPMorgan’s investment bank since 2004, when David A. Coulter, who had been the unit’s sole chief executive, was made chairman of the investment bank. The following year, Mr. Coulter left JPMorgan to join a private equity firm.

Under Mr. Black and Mr. Winters, JPMorgan’s investment bank absorbed the investment bank of Bear Stearns, which the firm acquired in a government-assisted deal last year.

JPMorgan didn’t indicate what Mr. Winters would be doing next. In Monday’s statement, he said he was “looking forward to my next professional challenge.”