Cyrus Sanati, The New York Times, September 28, 2010
Alex Wilmot-Sitwell, the co-head of UBS’s investment bank, has been named co-chairman and co-chief executive of the bank’s operations in Asia. Mr. Wilmot-Sitwell will relocate from London to Hong Kong in November and will lead the region together with Chi-Won Yoon, the bank’s current chief executive in Asia.
Carsten Kengeter, who is the co-chief executive of UBS’s investment bank with Mr. Wilmot-Sitwell, will now become the sole head of the investment bank. Both men entered the roles in 2009, following a management shake-up at the unit after the bank experienced heavy losses from the financial crisis.
Sponsored By:
Jonathan Burgos, Bloomberg, August 23, 2010
Deutsche Bank AG started dark pool trading in Hong Kong today, the German lender’s first such platform in Asia, to meet growing demand in the region.
Serena Saitto, Bloomberg, June 17, 2010
Nomura Holdings Inc., Japan’s largest brokerage, may hire as many as 35 bankers in the U.S. this year, part of a push to become a global securities firm rivaling Goldman Sachs Group Inc. and Credit Suisse Group AG.
The firm plans to have about 100 bankers in the U.S. by the end of 2010, from about 65 currently, Glenn Schiffman, Nomura’s head of Americas investment banking, said in an interview this week at the firm’s New York headquarters at the World Financial Center. It has already recruited 50 bankers, he said.
Nomura is investing 250 billion yen ($2.74 billion) to expand in the U.S. after it bought Lehman Brothers Holdings Inc.’s Asian and European units in 2008. Chief Executive Officer Kenichi Watanabe (Above) said in April that he aims to transform Nomura, which generates most of its revenue in Japan, into a global financial firm.
Takahiko Hyuga, Bloomberg, June 1, 2010
Nomura Holdings Inc., Japan’s biggest securities firm, more than tripled pay to top managers last fiscal year as it returned to profit from a record loss, according to a financial report sent to shareholders.
Chief Executive Officer Kenichi Watanabe and his executive team received average compensation of 145 million yen ($1.6 million) for the 12 months ended March 31, up from 41.5 million yen a year earlier, according to the report, which was also posted on the Tokyo-based company’s website today.
Bei Hu, Bloomberg, March 9, 2010
Citigroup Inc., the bank 27 percent owned by the U.S. government, hired John Liptak to head Asia- Pacific distressed and special situations on its regional credit trading team, according to an internal memo seen by Bloomberg.
Liptak (Above), who most recently ran an Asian special situations fund at Hong Kong-based Tribridge Investment Partners Ltd., will join Citigroup’s Asia-Pacific credit trading team, said the document. Godwin Chellam, a Citigroup spokesman in the city, confirmed the content of the memo.
MICHAEL J. de la MERCED, The New York Times, March 4, 2010
The American International Group moved closer to
the $15 billion sale of a second major life insurance unit on Thursday after
the Internal Revenue Service indicated that it would rule favorably on a
tax issue that had stymied the deal, people briefed on the matter said.
With the resolution of the tax issue, A.I.G. would be able to wrap up the sale of the unit, the American Life Insurance Company, known as Alico, to MetLife within days, these people said. One of them said a deal could be reached by Sunday evening.
Representatives for A.I.G. and MetLife declined to comment. If a deal is reached, it would represent another big repayment on the federal government’s bailout of A.I.G. The first $9 billion of proceeds from the sale will go toward repaying the Federal Reserve Bank of New York, which owns preferred shares in the unit.
This week, A.I.G. agreed to sell its big Asian life insurance unit, American International Assurance, to Prudential of Britain for $35.5 billion. The New York Fed is set to receive about $16 billion from that sale.
The government has committed more than $180 billion to supporting A.I.G., which was by far the costliest bailout of any company rescued during the financial crisis.
A.I.G. has committed to selling off nonessential businesses to help pay down that investment, reducing itself to a global property and casualty insurer and a domestic life insurer.
News of the potential resolution of the Alico tax issue was first reported by The Wall Street Journal online.
Discrimination Settlement
WASHINGTON (AP) — Two subsidiaries of A.I.G. have agreed to pay $7.1 million to settle allegations that they charged higher fees to African-American borrowers, violating antidiscrimination laws, the Justice Department announced Thursday.
A total of $6.1 million will go to 2,500 African-American borrowers of subprime loans who were charged higher brokerage fees. Thomas E. Perez, the assistant attorney general in charge of the Justice Department’s civil rights division, said it was the first time a lender had been held responsible for failing to ensure that brokers did not charge higher fees because of race.
Paul J Davies in London and Sundeep Tucker, Financial Times, March 3, 2010
The banks backing the Prudential’s $35.5bn (£23.5bn) bid for AIG’s Asian arm will say on Thursday that they have spread the risk of underwriting the UK company’s massive rights issue among 30 banks, according to people close to the deal.
The Pru must raise the equivalent of $20bn from equity investors to fund its bid for AIA, the Asian business of the stricken US insurance group.
The issue had originally been underwritten by just three banks: Credit Suisse, JPMorgan Chase and HSBC. At least one large Asian sovereign wealth fund has committed to sub-underwrite several billion dollars of the issue.
However, the fact that most leading global banks have been brought in on the deal does not preclude them from acting for a potential counterbidder, according to one person familiar with the situation, although it is still seen as highly unlikely that a rival offer for AIA will emerge.
The news comes as Tidjane Thiam (Above), Pru chief executive, is on a three-day tour of some of AIA’s offices to secure staff support for the planned deal and to meet regulators.
Mr Thiam told the Financial Times in Hong Kong yesterday: “I felt that my first priority was to travel to Asia to meet with Pru and AIA staff. I want to send an important signal that we can grow stronger together.”
He said his priority was to re-assure staff of the Pru and AIA of his plans to support the combined operation: “This acquisition is about growth, and we will combine the operations and operate a multi-brand strategy.”
Pru shares fell 20 per cent during the first two days of the week, reflecting investor concern over the size of the deal and rights issue. However, they stabilised yesterday and closed up 2.6 per cent at 500p.
Mr Thiam spent the day in Hong Kong and will travel to Malaysia, Singapore and Thailand before returning to London at the weekend. The Pru and AIA are the leading Asian insurance groups and staunch rivals, with each employing more than 300,000 tied agents spread across more than 12 markets.
The planned takeover has sparked fears of job losses, and speculation that some of AIA’s agents could seek rival employment. Mr Thiam reassured AIA staff in Hong Kong on Wednesday that he planned to promote, and not destroy, the unit’s “valuable” brand.
He is being accompanied on the trip by Robert Benmosche, AIG chief executive, who last weekend rubber-stamped the deal and aborted a planned Hong Kong listing of AIA.
The two will also meet regional regulators, whose blessings will be crucial. “We remain confident that the deal will be successful,” Mr Thiam said.
m7 mn`8cerns about the sustainability of house prices, which remained relatively high, is prompting consumers to curb spending. Unemployment unexpectedly rose in January to the highest since 1997.
A tight housing supply and low interest rates are expected to keep property prices from falling this year, the Royal Institute of Chartered Surveyors said Tuesday, perhaps easing some homeowners’ worries. Still, the availability of credit remained under pressure as some banks are concerned about meeting future regulatory requirements. Mortgage approvals dropped to the lowest level in eight months in January.
Uncertainty about the outcome of the general election, which is expected to be held within the next three months, and whether the new government would push ahead with large-scale spending and job cuts in the public sector, meant consumers were increasingly holding off big purchases. Yet, unsecured debt rose as Britain’s already indebted consumers borrowed more through credit cards and personal loans in January.
The pound fell to the lowest level in 10 months against the dollar on Monday before it started to recover on Wednesday, amid concerns that Britain might soon face a similar sovereign debt crisis to Greece. The Bank of England voted last month to halt its program to purchase government bonds and other debt to strengthen the economy but said it would not rule out continuing the program should the economy deteriorate again. The bank is expected to review its decision in May.
In the euro area, Mr. Trichet and the bank’s governing council are cautiously draining the cash they began providing in October 2008 after the collapse of Lehman Brothers brought interbank lending practically to a standstill.
The bank is concerned that too much available cash will fuel inflation or asset bubbles of the type that preceded the 2008 crisis.
The European Central Bank said it would return to competitive bidding for three-month loans, known as longer-term refinancing operations, beginning on April 28. The measure will limit the amount of money available to banks. But, as expected, the central bank said it would continue to provide unlimited credit to eligible banks for one-week loans.
The central bank “continues to provide liquidity support to the banking system of the euro area at very favorable conditions,” Mr. Trichet said.
Besides returning to competitive bidding, the bank has already stopped making any more 12-month loans to the roughly 2,200 banks in the euro zone that are eligible. The bank said in December that it would make the last round of six-month loans at the end of this month.
The central bank had extended the time periods for loans beyond the customary three months, to encourage institutions to continue lending to the private sector. The bank also allowed banks to borrow as much as they wanted at the benchmark interest rate, provided they could supply collateral. And it expanded the definition of the kinds of bonds and other securities it accepted as collateral.
Analysts say they expect the European Central Bank to continue providing unlimited funds for one-week periods, to avoid a crunch as the longer-term loans expire.
The A.I.A. tower in Hong Kong. With a takeover of A.I.A., Prudential would become the leading life insurer in Asia.
By Chris V. Nicholson and Andrew Ross Sorkin for The New York Times, March 1, 2010
Prudential of Britain said Monday that it had agreed to buy American International Group’s life insurance business in Asia in a deal valued at $35.5 billion.
The sale of American International Assurance, which is based in Hong Kong and is commonly known as A.I.A., would lead to the biggest repayment yet toward the more than $180 billion that the U.S. government has invested in A.I.G. as part of a huge series of bailouts. The Federal Reserve Bank of New York, which holds preferred shares in A.I.A., would receive the first $16 billion in proceeds from a sale.
With a takeover of A.I.A., Prudential would become the indisputable leader in Asia. Prudential said the combined group would be the leading life insurer in Hong Kong, Singapore, Malaysia, Indonesia, Vietnam, Thailand and the Philippines and the leading foreign life insurance business in China and India.
A 162-year-old company — which is not related to Prudential Financial in the United States — the British Prudential already draws a large part of its revenue from Asia, with more than 11 million policyholders in 13 markets.
“We are combining the two strongest international life insurers in Asia,” Tidjane Thiam, chief executive of Prudential, said in a conference call Monday to announce the deal.
Acquiring A.I.A. accelerates a strategy outlined by Mr. Thiam to increase the firm’s revenue in Asia sharply. The region is considered one of the fastest-growing markets for life insurance, thanks to a culture of saving and increasing affluence in many countries.
“Transformational is an overused word,” Mr. Thiam said, “but this deal is transformational.” He noted that in 2008, 44 percent of new profit for Prudential came from Asia; if A.I.A. and Prudential had combined in 2009, the figure would have been 60 percent. That geography, he said, promises “sustainable growth for years to come.”
Prudential said that the new company would assume the name Prudential, have headquarters and be incorporated in Britain and be traded on the London Stock Exchange with American Depository Receipts traded on the New York Stock Exchange.
That said, the A.I.A. brand is not set to disappear. “We like good brands and we tend not to kill them unnecessarily,” Mr. Thiam said. “A.I.A. is a strong brand.”
Once the deal is complete, the company said, it intends “in due course” to seek a dual primary listing on the Hong Kong stock exchange.
“This transaction offers the opportunity to bring together two leading companies, positioning the combined group to capture the future growth opportunity in Asia,” Prudential said.
Under the terms of the deal, Prudential would pay about $25 billion in cash and about $10.5 billion in a combination of stock, preferred shares and convertible preferred shares. The company said it would obtain the cash for the deal through a $20 billion rights issue and $5 billion in senior debt.
The rights issue must be approved by shareholders, and the deal faces other regulatory approvals. Prudential said it anticipated that the rights issue would take place in May and that the transaction would close in the third quarter.
Several analysts downgraded Prudential shares on Monday.
“It’s going to be enormously dilutive,” ING analyst Kevin Ryan told Reuters, speaking of the rights issue. “No one knows exactly what A.I.A. contains or how profitable it is, or how it overlaps with Pru’s existing businesses.”
Prudential first approached A.I.G. last year, but it was rebuffed because its offer was too low, according to people briefed on the matter.
A.I.A., founded in 1919 and one of A.I.G.’s oldest divisions, is widely considered one of the top businesses within A.I.G. The division has about 20 million policyholders throughout Asia, served by 23,000 employees and 300,000 agents. It has customers in Australia, Brunei, China, Hong Kong, India, Indonesia, Macao, Malaysia, New Zealand, the Philippines, Singapore, South Korea, Taiwan, Thailand and Vietnam.
According to Prudential, A.I.A. had an operating profit of $1.438 billion after tax in the financial year ending Nov. 30, 2009, based on unaudited figures.
A.I.G. had been preparing an initial public offering of the division, lining up banks to oversee what would have been among the largest listings this year. Analysts had estimated that an I.P.O. could raise as much as $20 billion, depending on the size of the stake sold. The company has now abandoned that plan.
“In considering two viable, very attractive alternatives to successfully monetize A.I.A., including an initial public offering, we decided that a sale to Prudential enables A.I.G. to realize value on a faster track to repay U.S. taxpayers,” Robert Benmosche, A.I.G.’s chief executive, said Monday. “This transaction, the most significant milestone to date in our ongoing effort to repay taxpayers, also gives us greater flexibility to move forward with A.I.G.’s restructuring and focus on enhancing the value of our key insurance businesses, which will benefit all stakeholders. ”
Before the financial crisis of 2008, A.I.G. was the world’s largest insurer, owning a diverse array of services across the globe assembled largely by its longtime chief executive, Maurice R. Greenberg. Since its rescue by the U.S. government, however, the company has sought to sell off businesses to help repay its bailout funds.
Mr. Benmosche has outlined a future for the company in which it would focus on selling property and casualty insurance worldwide, under a unit rebranded Chartis, and life insurance only in the United States.
Soon after arriving at A.I.G. in August, Mr. Benmosche slowed the company’s sales campaigns, instead seeking to fetch higher prices for the businesses it hoped to sell.
Beyond the sale of A.I.A., the insurer is also trying to sell another life insurance unit, the American Life Insurance Company, to MetLife for about $15 billion, according to people briefed on the matter.
Those negotiations have been stymied over a tax issue that requires resolution from the Internal Revenue Service, these people said, though they still expected to reach a deal. The company is also seeking to sell other units, including an aircraft-leasing business.
For Prudential, the purchase of A.I.A. represents such a significant shift that some analysts had wondered it if would look to sell its British business. In response to a question about that Monday, Mr. Thiam said, “The U.K. generates cash and capital for us, and it’s an important part of the group.”
“We are very British in identity, even if my accent is not,” said Mr. Thiam, who was born in Ivory Coast.
Keith Bradsher, The New York Times, February 12, 2010
HONG KONG — For the second time in less than five weeks, China’s central bank has moved to limit lending to consumers and businesses by ordering big commercial banks to park a larger share of their deposits at the central bank.
The step, announced late Friday, came earlier than most economists had expected and was aimed at forestalling a rekindling of inflation by controlling a rapid expansion in bank loans. Families, real estate developers and industrial companies have been borrowing heavily and have started paying more for everything from food to apartments.
While the central bank announced its action after the close of markets in China, it provoked an immediate reaction elsewhere. Stock index futures in the United States were down nearly 1 percent. Commodity prices also tumbled as investors interpreted the action as likely to trim China’s demand and possibly limit inflation, with oil and copper prices each down more than 1 percent.
The Chinese National Bureau of Statistics said Thursday that annual inflation in producer prices, typically measured at the factory gate, had more than doubled in January from December, to 4.3 percent. Average housing prices in large and midsize cities were up 9.5 percent last month from a year earlier, the fastest rate of increase in 19 months.
Rising producer prices and asset prices have not yet fed into high inflation in consumer prices, which were up 1.5 percent last month from a year earlier despite a sharper uptick in food prices.
The central bank action Friday was aimed at keeping a tight rein on consumer prices, as inflation has led to unrest in the past when it has eroded workers’ spending power.
The People’s Bank of China, the central bank (headquarters seen above), ordered an increase in banks’ reserve requirement ratio, which is the share of deposits that commercial lenders must park at the central bank, earning very little interest. A higher reserve requirement ratio means that commercial banks have less money left to lend to customers.
The central bank pushed up the ratio by half a percentage point, to 16.5 percent, for large banks, effective Feb. 25. But it left the ratio unchanged at 14 percent for smaller financial institutions, like rural credit cooperatives, which have been less active in a frenzy of lending to big state-owned enterprises in particular this winter.
The previous increase in the ratio was announced on Jan. 12 and took effect on Jan. 18. The latest increase is to take effect after the weeklong Lunar New Year holiday next week.
“The timing is a surprise,” said Qing Wang, an economist in the Hong Kong office of Morgan Stanley. But he noted that China’s policy makers always injected extra cash into the country’s financial system before Lunar New Year to accommodate holiday spending. Raising the ratio could prevent that cash from translating into more lending and speculative real estate activity after the holiday.
Jing Ulrich, the managing director and chairwoman of China equities and commodities at J.P. Morgan, said, “The message coming out of China has been quite clear — policy makers are becoming more concerned about containing inflationary expectations and managing the risk of asset price bubbles as a result of last year’s aggressive expansion of credit.”
Stephen Green, the head of greater China research in the Shanghai office of Standard Chartered, said that he had been expecting one increase a month in the ratio for the foreseeable future.
The increase in the reserve ratio will not actually require banks to curtail lending immediately, because the commercial banks have typically been keeping about 18 percent of their assets at the central bank — more than the reserve requirement. But raising the minimum makes it less likely that big banks will take this money back and start lending it elsewhere.
China’s central bankers face an acute dilemma in trying to rein in lending after banks lent more money in January than in the previous three months combined.
The conventional remedy in most industrialized countries would be to push up the interest rates that borrowers must pay for loans, typically through actions in money markets. But that would draw even more investment into China, at a time when the Chinese authorities are already struggling to control inflows of foreign cash seeking high returns mainly in the country's real estate market.
China has been trying to limit investment inflows for years because that makes the flows make it even harder for China to hold down the value of the renminbi against the dollar. If the renminbi appreciates, that would make Chinese exports more expensive in foreign markets, potentially leading to job losses at export factories.
The People's Bank of China has tried to respond to this conundrum by periodically adjusting reserve requirement ratios and imposing administrative limits on bank loans instead.
