(Bloomberg) -- Asian stocks retreated, dragging the MSCI Asia Pacific Index from a seven-month high, as the stronger yen diminished earnings prospects in Japan and the U.S. Federal Reserve projected a deeper recession.
Toyota Motor Corp., which got 31 percent of its revenue in North America last fiscal year, lost 2.2 percent. Department store operator Takashimaya Co. lost 3.4 percent in Tokyo as the first cases of swine flu were confirmed in the city. Rio Tinto Group, the world’s No. 3 mining company, rose 2.4 percent after the Sydney Morning Herald reported Aluminum Corp. of China may accept a lower stake to win approval for an investment.
The MSCI Asia Pacific Index fell 0.6 percent to 99.64 as of 12:21 p.m. in Tokyo. The gauge closed at its highest level since Oct. 6 yesterday, driving stock valuations to the most expensive since 2003.
“We need to see economic fundamentals improve to match the recovery in equity markets,” said Chong Yoon Chou, Singapore- based investment director at Aberdeen Asset Management Asia Ltd., which has $27 billion of assets. “An economic recovery will take some time.”
Japan’s Nikkei 225 Stock Average declined 1.2 percent to 9,235.15. China’s Shanghai Composite Index lost 1.6 percent as a Credit Suisse Group AG report said a rebound in economic growth won’t be as “strong as many recently have hoped.” Markets in Asia fell except in Malaysia and Vietnam.
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Ibiden Co., which makes components for memory chips, slumped 2.5 percent after Nikko Citigroup Ltd. recommended selling the stock, citing weak profit growth. Chi Mei Optoelectronics Corp., Taiwan’s No. 2 maker of liquid-crystal displays, surged for a second day after China said it will widen subsidies to include home appliances. Online retailer Rakuten Inc. jumped 3.9 percent on speculation an outbreak of swine flu will push consumers to shop from home.
Futures on the U.S. Standard & Poor’s 500 Index lost 0.4 percent. The gauge sank 0.5 percent yesterday as American Express Co. said legislation to curb credit-card fees may reduce lending to consumers.
Fed policy makers projected a fourth-quarter U.S. contraction of 1.3 percent to 2 percent from a year earlier, according to minutes of an April 28-29 meeting released yesterday. That compares with January projections for a contraction of 0.5 percent to 1.3 percent.
U.S. unemployment surged to 8.9 percent in April, a level not seen since 1983.
Yen Strength
The yen strengthened versus the dollar to as much as 94.29 today from 95.52 at the 3 p.m. close of stock trading in Tokyo yesterday, as the Fed said it considered buying more assets, a move that could devalue the U.S. dollar. A stronger local currency diminishes the value of overseas sales for Japanese manufacturers.
“Should the yen continue to strengthen, people will likely start doubting whether companies’ rather optimistic outlooks are justified,” said Mitsushige Akino, who oversees about $632 million at Ichiyoshi Investment Management Co. in Tokyo.
Toyota sank 2.2 percent to 3,580 yen. Sony Corp., the maker of the PlayStation 3 game console, declined 1.6 percent to 2,465 yen even after the company said it plans to reduce procurement costs by a fifth.
The MSCI Asia benchmark rallied as much as 42 percent from a more-than five year low reached on March 9. Stocks included in the MSCI gauge now trade at 43 times trailing earnings, the most expensive since 2003.
Oil, Copper
Rio gained 2.4 percent to A$66.37. Aluminum Corp., known as Chinalco, is open to letting Rio sell convertible bonds to other shareholders and would be prepared to accept a stake of 15 percent, the Sydney Morning Herald said. That would potentially avoid a breach of foreign ownership limits.
Commodity producers also climbed as crude oil for July delivery jumped 3.2 percent to $62.04 a barrel in New York yesterday, the highest settlement since Nov. 10. Copper futures added 1.8 percent. Both prices fell today.
Takashimaya slipped 3.4 percent to 575 yen. Aeon Co., Japan’s second-largest retailer, declined 3.1 percent to 856 yen. Rakuten jumped 3.9 percent to 52,800 yen.
Two 16-year-old high school students have been confirmed as the first cases of swine flu in the Tokyo area, according to statements from the Tokyo and Kawasaki city governments. Japan said 234 people have the virus, which has sickened more than 10,000 people worldwide.
“Retail, restaurant and leisure businesses will be affected,” Ichiyoshi’s Akino said. “As people are likely to stay in their house, online retailers and mail-order companies will benefit.”
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Wednesday, May 20, 2009
Tuesday, May 19, 2009
Japan Economy Shrinks Record 15.2% as Exports, Spending Plunge
(Bloomberg) -- Japan’s economy shrank by a record last quarter as exports collapsed and consumers and businesses slashed spending, a decline that probably marked the low point in the country’s worst recession since World War II.
Gross domestic product fell an annualized 15.2 percent in the three months ended March 31, following a revised fourth- quarter drop of 14.4 percent, the Cabinet Office said today in Tokyo. The economy contracted 3.5 percent in the year ended March 31, the most since records began in 1955.
Exports plunged an unprecedented 26 percent last quarter, forcing companies from Toyota Motor Corp. to Hitachi Ltd. to cut production, workers and wages. Stocks have gained 32 percent since reaching 26-year low in March on speculation worldwide interest-rate reductions and spending by governments will halt the slide in the world’s second-largest economy.
“There was a collapse across the board,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. Still, he added, there’s “light at the end of the tunnel” and the economy will resume growing this quarter as companies replenish inventories and stimulus plans at home and abroad take effect.
The yen traded at 95.59 per dollar at 12:56 p.m. in Tokyo from 96.16 before the report was published. The Nikkei 225 Stock Average rose 0.3 percent. Economists surveyed predicted the economy would shrink 16.1 percent.
Worse Than U.S.
GDP fell 4 percent on a non-annualized basis, more than double the U.S.’s 1.6 percent slide. It’s also worse than Europe’s record 2.5 percent contraction. Without adjusting for price changes, Japan shrank 2.9 percent last quarter.
Weaker domestic demand was the biggest contributor to the decline, shaving 2.6 percentage points off GDP, the most since 1974. Net exports -- the difference between exports and imports -- was responsible for 1.4 percentage points of the drop.
Consumer spending slid 1.1 percent and business investment plunged a record 10.4 percent. Economists say companies will keep cutting spending because the decline in demand has left factories and workers underused.
“There is a huge problem of over-capacity,” said Hiromichi Shirakawa, chief economist at Credit Suisse Group AG in Tokyo. “That means capital spending is not likely to pick up.”
Hitachi, a maker of nuclear reactors, home appliances and hard-disk drives, will trim costs by 500 billion yen ($5.2 billion) this fiscal year to minimize losses after a record 787.3 billion yen deficit last year. The Tokyo-based company said in January it plans to cut 7,000 jobs.
May Grow
Still, reports in the past month suggest the world’s second-largest economy may grow for the first time in a year this quarter, albeit from a low point, as exports stabilize and Prime Minister Taro Aso’s 15.4 trillion yen stimulus plan, announced in April, takes effect.
Consumer confidence climbed to a 10-month high in April. Exports increased in March from a month earlier, and factory output rose for the first time since September.
“Japan, first of all, will get a big boost from fiscal stimulus,” Thomas Byrne, senior vice president of Moody’s Investors Service, said in an interview in Tokyo. “Second, if the global economy picks up a little bit, that will help tremendously in Japan because of its dependence on exports.”
Byrne said Moody’s is unlikely to cut Japan’s debt rating over the next year because investors are willing to buy bonds that will fund the stimulus plans. Moody’s unified Japan’s ratings at Aa2 this week, raising the local-currency assessment from Aa3 and lowering the foreign-currency view from Aaa.
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Gross domestic product fell an annualized 15.2 percent in the three months ended March 31, following a revised fourth- quarter drop of 14.4 percent, the Cabinet Office said today in Tokyo. The economy contracted 3.5 percent in the year ended March 31, the most since records began in 1955.
Exports plunged an unprecedented 26 percent last quarter, forcing companies from Toyota Motor Corp. to Hitachi Ltd. to cut production, workers and wages. Stocks have gained 32 percent since reaching 26-year low in March on speculation worldwide interest-rate reductions and spending by governments will halt the slide in the world’s second-largest economy.
“There was a collapse across the board,” said Yoshiki Shinke, a senior economist at Dai-Ichi Life Research Institute in Tokyo. Still, he added, there’s “light at the end of the tunnel” and the economy will resume growing this quarter as companies replenish inventories and stimulus plans at home and abroad take effect.
The yen traded at 95.59 per dollar at 12:56 p.m. in Tokyo from 96.16 before the report was published. The Nikkei 225 Stock Average rose 0.3 percent. Economists surveyed predicted the economy would shrink 16.1 percent.
Worse Than U.S.
GDP fell 4 percent on a non-annualized basis, more than double the U.S.’s 1.6 percent slide. It’s also worse than Europe’s record 2.5 percent contraction. Without adjusting for price changes, Japan shrank 2.9 percent last quarter.
Weaker domestic demand was the biggest contributor to the decline, shaving 2.6 percentage points off GDP, the most since 1974. Net exports -- the difference between exports and imports -- was responsible for 1.4 percentage points of the drop.
Consumer spending slid 1.1 percent and business investment plunged a record 10.4 percent. Economists say companies will keep cutting spending because the decline in demand has left factories and workers underused.
“There is a huge problem of over-capacity,” said Hiromichi Shirakawa, chief economist at Credit Suisse Group AG in Tokyo. “That means capital spending is not likely to pick up.”
Hitachi, a maker of nuclear reactors, home appliances and hard-disk drives, will trim costs by 500 billion yen ($5.2 billion) this fiscal year to minimize losses after a record 787.3 billion yen deficit last year. The Tokyo-based company said in January it plans to cut 7,000 jobs.
May Grow
Still, reports in the past month suggest the world’s second-largest economy may grow for the first time in a year this quarter, albeit from a low point, as exports stabilize and Prime Minister Taro Aso’s 15.4 trillion yen stimulus plan, announced in April, takes effect.
Consumer confidence climbed to a 10-month high in April. Exports increased in March from a month earlier, and factory output rose for the first time since September.
“Japan, first of all, will get a big boost from fiscal stimulus,” Thomas Byrne, senior vice president of Moody’s Investors Service, said in an interview in Tokyo. “Second, if the global economy picks up a little bit, that will help tremendously in Japan because of its dependence on exports.”
Byrne said Moody’s is unlikely to cut Japan’s debt rating over the next year because investors are willing to buy bonds that will fund the stimulus plans. Moody’s unified Japan’s ratings at Aa2 this week, raising the local-currency assessment from Aa3 and lowering the foreign-currency view from Aaa.
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Asian Stocks Advance, Led by Mitsubishi; T&D Slumps on Loss
(Bloomberg) -- Asian stocks rose, led by commodity companies, as Goldman, Sachs & Co. recommended buying Mitsubishi Corp. shares. Finance companies declined.
Mitsubishi Corp., a trading company that gets 47 percent of its revenue from metals and energy products, climbed 4.5 percent. T&D Holdings Inc., Japan’s biggest life insurer, slumped 13 percent after posting a wider-than-estimated full-year loss. Billabong International Ltd., Australia’s largest surfwear maker, tumbled 16 percent after a share sale.
The MSCI Asia Pacific Index rose 0.5 percent to 99.82 at 12:04 p.m. in Tokyo, set for its highest close since Oct. 6. Through yesterday, the gauge had surged 41 percent from a more than five-year low on March 9. Concern that stock valuations had overpriced earnings prospects gave the measure its biggest weekly decline in two months last week.
“People are buying and selling stocks for quick returns, driving the market up and down like a carnival,” said Yoshihiro Ito, senior strategist at Tokyo-based Okasan Asset Management Co., which oversees the equivalent of $9.3 billion.
Japan’s Nikkei 225 Stock Average advanced 0.4 percent to 9,330.46 as a government report showed the economy contracted an annualized 15.2 percent in the three months ended March 31, less than some economists predicted. Most markets rose, except for Singapore and Hong Kong.
James Hardie Industries NV, the biggest seller of home siding in the U.S., declined 2.3 percent in Sydney after profit slumped in the fourth quarter. Kawasaki Kisen Kaisha Ltd., Japan’s No. 3 shipping line, added 2.9 percent as commodity shipping rates gained for a 13th-straight session.
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Futures on the Standard & Poor’s 500 Index slipped 0.3 percent. The gauge dropped 0.2 percent in New York yesterday as a Commerce Department report showed housing starts sank 13 percent in April, while economists had expected an increase. Financial shares slumped after Moody’s Investors Service said commercial property values have tumbled.
Mitsubishi jumped 4.5 percent to 1,736 in Tokyo. Mitsui & Co., Mitsubishi’s closest rival, added 4.4 percent to 1,160 yen. Goldman Sachs raised its view on Japan’s trading house sector to “attractive” from “neutral.” The brokerage upgraded Mitsubishi to “buy” from “neutral.”
“Demand for resources looks likely to rebound and investors are willing to buy commodity-related companies on expectations for an earnings recovery,” said Hiroichi Nishi, general manager at Nikko Cordial Securities Co.
Crude oil futures in New York rose 1.1 percent to $59.65 a barrel yesterday, the highest settlement since Nov. 10.
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Mitsubishi Corp., a trading company that gets 47 percent of its revenue from metals and energy products, climbed 4.5 percent. T&D Holdings Inc., Japan’s biggest life insurer, slumped 13 percent after posting a wider-than-estimated full-year loss. Billabong International Ltd., Australia’s largest surfwear maker, tumbled 16 percent after a share sale.
The MSCI Asia Pacific Index rose 0.5 percent to 99.82 at 12:04 p.m. in Tokyo, set for its highest close since Oct. 6. Through yesterday, the gauge had surged 41 percent from a more than five-year low on March 9. Concern that stock valuations had overpriced earnings prospects gave the measure its biggest weekly decline in two months last week.
“People are buying and selling stocks for quick returns, driving the market up and down like a carnival,” said Yoshihiro Ito, senior strategist at Tokyo-based Okasan Asset Management Co., which oversees the equivalent of $9.3 billion.
Japan’s Nikkei 225 Stock Average advanced 0.4 percent to 9,330.46 as a government report showed the economy contracted an annualized 15.2 percent in the three months ended March 31, less than some economists predicted. Most markets rose, except for Singapore and Hong Kong.
James Hardie Industries NV, the biggest seller of home siding in the U.S., declined 2.3 percent in Sydney after profit slumped in the fourth quarter. Kawasaki Kisen Kaisha Ltd., Japan’s No. 3 shipping line, added 2.9 percent as commodity shipping rates gained for a 13th-straight session.
Brokerage Upgrade
Futures on the Standard & Poor’s 500 Index slipped 0.3 percent. The gauge dropped 0.2 percent in New York yesterday as a Commerce Department report showed housing starts sank 13 percent in April, while economists had expected an increase. Financial shares slumped after Moody’s Investors Service said commercial property values have tumbled.
Mitsubishi jumped 4.5 percent to 1,736 in Tokyo. Mitsui & Co., Mitsubishi’s closest rival, added 4.4 percent to 1,160 yen. Goldman Sachs raised its view on Japan’s trading house sector to “attractive” from “neutral.” The brokerage upgraded Mitsubishi to “buy” from “neutral.”
“Demand for resources looks likely to rebound and investors are willing to buy commodity-related companies on expectations for an earnings recovery,” said Hiroichi Nishi, general manager at Nikko Cordial Securities Co.
Crude oil futures in New York rose 1.1 percent to $59.65 a barrel yesterday, the highest settlement since Nov. 10.
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Bank of America Raises $13.5 Billion After Stress-Test Verdict
(Bloomberg) -- Bank of America Corp., the biggest U.S. bank by assets, raised about $13.5 billion in a sale of common stock after U.S. regulators determined it needed more cash to weather an extended recession.
The bank issued 1.25 billion shares at an average price of $10.77 each, according to a statement yesterday. The Charlotte, North Carolina-based company plans to boost common equity capital by $17 billion through the sale of stock and by converting preferred shares mostly held by institutional investors, Chief Executive Officer Kenneth Lewis said May 7.
“The worst is over for Bank of America and it will have absolutely no problem raising more capital,” said Kim Yong Tae, head of overseas investment at Yurie Asset Management Inc. in Seoul, which manages $2 billion in assets. “The minute the U.S. government started pumping taxpayer money into lenders its financial-system risks started easing, and now are completely gone.”
Regulators told Bank of America to raise $33.9 billion after conducting stress tests, the largest amount among the 19 banks examined. Other banks ordered to raise capital include Wells Fargo & Co., which made an $8.6 billion offering, and Morgan Stanley, which raised $4 billion, both on May 8.
“We are pleased to have this portion of our capital plan completed,” Bank of America Chief Financial Officer Joe Price said in the statement. “This strengthens and diversifies our capital structure.”
Bank of America declined 48 cents, or 4.1 percent, to $11.25 at 4:15 p.m. in New York Stock Exchange composite trading. It has dropped 20 percent this year.
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The bank issued 1.25 billion shares at an average price of $10.77 each, according to a statement yesterday. The Charlotte, North Carolina-based company plans to boost common equity capital by $17 billion through the sale of stock and by converting preferred shares mostly held by institutional investors, Chief Executive Officer Kenneth Lewis said May 7.
“The worst is over for Bank of America and it will have absolutely no problem raising more capital,” said Kim Yong Tae, head of overseas investment at Yurie Asset Management Inc. in Seoul, which manages $2 billion in assets. “The minute the U.S. government started pumping taxpayer money into lenders its financial-system risks started easing, and now are completely gone.”
Regulators told Bank of America to raise $33.9 billion after conducting stress tests, the largest amount among the 19 banks examined. Other banks ordered to raise capital include Wells Fargo & Co., which made an $8.6 billion offering, and Morgan Stanley, which raised $4 billion, both on May 8.
“We are pleased to have this portion of our capital plan completed,” Bank of America Chief Financial Officer Joe Price said in the statement. “This strengthens and diversifies our capital structure.”
Bank of America declined 48 cents, or 4.1 percent, to $11.25 at 4:15 p.m. in New York Stock Exchange composite trading. It has dropped 20 percent this year.
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Monday, May 18, 2009
Asian Stocks Rise on Growth Optimism; BHP, Toyota Motor Gain
(Bloomberg) -- Asian stocks rose as higher confidence among U.S. homebuilders, a surge in oil prices and a drop in bank borrowing costs stoked optimism the global economy is recovering.
Toyota Motor Corp., which gets a third of its sales in North America, rose 3.1 percent as the yen weakened versus the dollar. BHP Billiton Ltd., Australia’s biggest oil producer, climbed 3.4 percent after crude-oil futures rose to a six-month high. Mitsubishi UFJ Financial Group Ltd. gained 5.9 percent as the London interbank offered rate fell the most in two months. Indian stocks were poised to advance after election results triggered a surge in their American depositary receipts.
“The housing market is the most important factor in predicting the direction of an economy,” said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co. “When we look back on these times, we’ll see the global economy bottomed out in the April-June period.”
The MSCI Asia Pacific Index advanced 2.2 percent to 98.97 at 11 a.m. in Tokyo. Through yesterday, the gauge climbed 40 percent from a more than five-year low on March 9.
Japan’s Nikkei 225 Stock Average climbed 2.8 percent to 9,293.09. Australia’s S&P/ASX 200 Index added 2.1 percent and South Korea’s Kospi index rose 2 percent. Trading in India is due to resume trading today as a 17 percent surge in the Sensitive Index triggered a suspension yesterday.
Weaker Yen
Futures on the Standard & Poor’s 500 Index were little changed. The gauge climbed 3 percent yesterday, the most in two weeks, as analysts recommended Bank of America Corp. and Lowe’s Cos. beat earnings projections. Separately, the National Association of Home Builders/Wells Fargo index of builders’ confidence advanced in May to the highest level since September.
Toyota rose 3.1 percent to 3,670 yen in Tokyo. Honda Motor Co., which makes 51 percent of its revenue in North America, added 0.9 percent to 2,705 yen. Japanese exporters also rose on speculation a weaker yen will boost the value of overseas sales.
The surge in equities signaled investors are more willing to take risk, making the yen less attractive as a haven. The yen depreciated against the dollar to as much as 96.40 today from 95.03 at the 3 p.m. close of stock trading in Tokyo yesterday. The Japanese currency weakened versus the euro to as much as 130.68 from 127.91.
BHP Billiton, the world’s biggest mining company and Australia’s largest oil producer, rose 3.4 percent to A$34.01. Inpex Corp., Japan’s largest oil explorer, climbed 4.6 percent to 702,000 yen.
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Toyota Motor Corp., which gets a third of its sales in North America, rose 3.1 percent as the yen weakened versus the dollar. BHP Billiton Ltd., Australia’s biggest oil producer, climbed 3.4 percent after crude-oil futures rose to a six-month high. Mitsubishi UFJ Financial Group Ltd. gained 5.9 percent as the London interbank offered rate fell the most in two months. Indian stocks were poised to advance after election results triggered a surge in their American depositary receipts.
“The housing market is the most important factor in predicting the direction of an economy,” said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co. “When we look back on these times, we’ll see the global economy bottomed out in the April-June period.”
The MSCI Asia Pacific Index advanced 2.2 percent to 98.97 at 11 a.m. in Tokyo. Through yesterday, the gauge climbed 40 percent from a more than five-year low on March 9.
Japan’s Nikkei 225 Stock Average climbed 2.8 percent to 9,293.09. Australia’s S&P/ASX 200 Index added 2.1 percent and South Korea’s Kospi index rose 2 percent. Trading in India is due to resume trading today as a 17 percent surge in the Sensitive Index triggered a suspension yesterday.
Weaker Yen
Futures on the Standard & Poor’s 500 Index were little changed. The gauge climbed 3 percent yesterday, the most in two weeks, as analysts recommended Bank of America Corp. and Lowe’s Cos. beat earnings projections. Separately, the National Association of Home Builders/Wells Fargo index of builders’ confidence advanced in May to the highest level since September.
Toyota rose 3.1 percent to 3,670 yen in Tokyo. Honda Motor Co., which makes 51 percent of its revenue in North America, added 0.9 percent to 2,705 yen. Japanese exporters also rose on speculation a weaker yen will boost the value of overseas sales.
The surge in equities signaled investors are more willing to take risk, making the yen less attractive as a haven. The yen depreciated against the dollar to as much as 96.40 today from 95.03 at the 3 p.m. close of stock trading in Tokyo yesterday. The Japanese currency weakened versus the euro to as much as 130.68 from 127.91.
BHP Billiton, the world’s biggest mining company and Australia’s largest oil producer, rose 3.4 percent to A$34.01. Inpex Corp., Japan’s largest oil explorer, climbed 4.6 percent to 702,000 yen.
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Goldman, Morgan Stanley Said to Apply for TARP Exit
(Bloomberg) -- Goldman Sachs Group Inc., JPMorgan Chase & Co. and Morgan Stanley applied to repay the combined $45 billion they received in October from the government’s Troubled Asset Relief Program, said people familiar with the matter.
The three New York-based banks need approval from the Federal Reserve, their primary supervisor, to return the money, according to the people, who requested anonymity because the application process isn’t public. Spokesmen for the three banks declined to comment, as did Calvin Mitchell, a spokesman for the Federal Reserve Bank of New York.
If approved, the refunds would be the biggest yet to the $700 billion TARP program established by Congress last year during the investor furor that followed the bankruptcy of Lehman Brothers Holdings Inc. Banks are keen to repay the money to shake off restrictions on compensation and hiring that were imposed on TARP recipients in February.
“It really is a way for them to break from the herd,” said Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors in Cincinnati, which holds Goldman Sachs and JPMorgan shares among the $13.8 billion it oversees. “It’s a great way to attract customers, personnel, capital.”
JPMorgan, Goldman Sachs, and Morgan Stanley were among nine banks that were persuaded in mid-October by then-Treasury Secretary Henry Paulson to accept the first $125 billion of capital injections from the TARP program to help restore stability to the financial markets.
Stress-Test Results
The refunds would be the first by the biggest banks that participated in the program. As of May 15, 14 of the smaller banks that received capital under the program had already repaid it, according to data compiled by Bloomberg.
The 19 biggest banks were waiting for the conclusion earlier this month of so-called stress tests to determine whether they would require additional capital to withstand a further deterioration of the economy.
Goldman Sachs and JPMorgan, the fifth- and second-biggest U.S. banks by assets, were found not to need any more money. Morgan Stanley, the sixth-biggest bank, raised $4.57 billion by selling stock this month, exceeding the $1.8 billion in additional capital the regulators said the bank may require.
Treasury Secretary Timothy Geithner said on April 21 that he would welcome firms returning TARP funds as long as their regulators sign off. He added that regulators will consider whether banks have enough capital to keep lending and whether the financial system as a whole can supply the credit needed to ensure an economic recovery.
‘Wrong Time’
While executives at Goldman Sachs and JPMorgan have expressed a desire to repay their TARP money for months, Morgan Stanley Chairman and Chief Executive Officer John Mack told employees on March 30 that he thought it was “the wrong time” to repay the money.
Morgan Stanley, which reported a first-quarter loss, also slashed its quarterly dividend 81 percent to 5 cents. On May 8, when the company sold stock, it also sold $4 billion of debt that didn’t carry a government guarantee. Selling non-guaranteed debt is a prerequisite for repaying TARP money.
The banks will also have to decide whether to try to buy back the warrants that the government received as part of the TARP investments. The warrants, which could convert into stock if not repurchased, would add to the cost of repayment.
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The three New York-based banks need approval from the Federal Reserve, their primary supervisor, to return the money, according to the people, who requested anonymity because the application process isn’t public. Spokesmen for the three banks declined to comment, as did Calvin Mitchell, a spokesman for the Federal Reserve Bank of New York.
If approved, the refunds would be the biggest yet to the $700 billion TARP program established by Congress last year during the investor furor that followed the bankruptcy of Lehman Brothers Holdings Inc. Banks are keen to repay the money to shake off restrictions on compensation and hiring that were imposed on TARP recipients in February.
“It really is a way for them to break from the herd,” said Peter Sorrentino, a senior portfolio manager at Huntington Asset Advisors in Cincinnati, which holds Goldman Sachs and JPMorgan shares among the $13.8 billion it oversees. “It’s a great way to attract customers, personnel, capital.”
JPMorgan, Goldman Sachs, and Morgan Stanley were among nine banks that were persuaded in mid-October by then-Treasury Secretary Henry Paulson to accept the first $125 billion of capital injections from the TARP program to help restore stability to the financial markets.
Stress-Test Results
The refunds would be the first by the biggest banks that participated in the program. As of May 15, 14 of the smaller banks that received capital under the program had already repaid it, according to data compiled by Bloomberg.
The 19 biggest banks were waiting for the conclusion earlier this month of so-called stress tests to determine whether they would require additional capital to withstand a further deterioration of the economy.
Goldman Sachs and JPMorgan, the fifth- and second-biggest U.S. banks by assets, were found not to need any more money. Morgan Stanley, the sixth-biggest bank, raised $4.57 billion by selling stock this month, exceeding the $1.8 billion in additional capital the regulators said the bank may require.
Treasury Secretary Timothy Geithner said on April 21 that he would welcome firms returning TARP funds as long as their regulators sign off. He added that regulators will consider whether banks have enough capital to keep lending and whether the financial system as a whole can supply the credit needed to ensure an economic recovery.
‘Wrong Time’
While executives at Goldman Sachs and JPMorgan have expressed a desire to repay their TARP money for months, Morgan Stanley Chairman and Chief Executive Officer John Mack told employees on March 30 that he thought it was “the wrong time” to repay the money.
Morgan Stanley, which reported a first-quarter loss, also slashed its quarterly dividend 81 percent to 5 cents. On May 8, when the company sold stock, it also sold $4 billion of debt that didn’t carry a government guarantee. Selling non-guaranteed debt is a prerequisite for repaying TARP money.
The banks will also have to decide whether to try to buy back the warrants that the government received as part of the TARP investments. The warrants, which could convert into stock if not repurchased, would add to the cost of repayment.
Read more here
Sunday, May 17, 2009
AIG to Accelerate Separation of AIA, Seek IPO in Asia
(Bloomberg) -- American International Group Inc., the insurer bailed out by the U.S. government, is accelerating the separation of American International Assurance Co. and will list it on an Asian exchange.
AIG has hired Blackstone Group LP to advise on the reorganization and initial public offering of its Asian life unit, which operates in 13 markets in the region with more than 20 million customers and over $60 billion of assets, it said in a statement issued through Business Wire today.
AIG, based in New York, is selling property and businesses after being bailed out four times by the U.S. government. The company has tapped about $45.5 billion from a U.S. credit line as of earlier this month.
“At this stage, we believe that a public listing for AIA would be in the best interests of all stakeholders, including U.S. taxpayers, policyholders, employees and distribution partners,” AIG Chairman and Chief Executive Officer Edward Liddy said in the statement.
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AIG has hired Blackstone Group LP to advise on the reorganization and initial public offering of its Asian life unit, which operates in 13 markets in the region with more than 20 million customers and over $60 billion of assets, it said in a statement issued through Business Wire today.
AIG, based in New York, is selling property and businesses after being bailed out four times by the U.S. government. The company has tapped about $45.5 billion from a U.S. credit line as of earlier this month.
“At this stage, we believe that a public listing for AIA would be in the best interests of all stakeholders, including U.S. taxpayers, policyholders, employees and distribution partners,” AIG Chairman and Chief Executive Officer Edward Liddy said in the statement.
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