Thursday, April 29, 2010
Tuesday, April 27, 2010
Monday, April 26, 2010
Sunday, April 25, 2010
Wednesday, April 21, 2010
Moody's Cuts Toyota's Ratings, Outlook Negative - CNBC
Moody's Cuts Toyota's Ratings, Outlook Negative - CNBC
Moody's Investors Service cut recall-hit Toyota Motor's [TM 78.09
-0.67 (-0.85%) 
] credit ratings on Thursday, saying that it expected the automaker's current low profitability to continue and that litigation costs could be significant.
The Japanese automaker's once market-leading reputation for quality has been tarnished by a swathe of recalls, particularly in the United States where it recently agreed to pay a record $16.4 million federal fine.
Moody's Investors Service cut recall-hit Toyota Motor's [TM 78.09
-0.67 (-0.85%) ] credit ratings on Thursday, saying that it expected the automaker's current low profitability to continue and that litigation costs could be significant.The Japanese automaker's once market-leading reputation for quality has been tarnished by a swathe of recalls, particularly in the United States where it recently agreed to pay a record $16.4 million federal fine.
"The rating action reflects the ongoing low level of profitability evident at Toyota, and which we expect to continue for an extended period," Tadashi Usui, a Moody's vice president and senior analyst, said in a statement.
Toyota had estimated in February that previous recalls would cost it $2 billion for its fiscal year ending in March.
But it has recalled more vehicles since that estimate, and most analysts believe the costs will be significantly higher.
Toyota shares extended losses after the announcement to an intraday low of 3,590 yen for a drop of 1.6 percent on the day, in line with the broader market. Analysts said the shares had largely factored in the bad news at Toyota.
"The downgrade is reflecting the concerns market players felt back in January in a delayed manner. I don't expect this to have a significant impact on Toyota shares," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.Moody's cut the rating to Aa2 from Aa1, saying there was uncertainty over Toyota's pricing power and a risk that its operating profit margin would remain well below that appropriate for its rating level until 2012 and possibly beyond.
"Its product quality and recall challenges -- largely centered in the U.S. -- have created significant uncertainty over whether it can maintain the pricing power it has historically achieved over its rivals," Usui said.
"In coming years, further impacting profitability, on an extraordinary basis, will be the litigation costs associated with the recall; and while the size of such costs is hard to quantify, they could be material. But, for now, its capital and liquidity reserves should be enough to deal with any problems," Usui said.
But Moody's also said it expects Toyota to remain the leading global auto maker in coming years, adding that its current rating should find support from its very strong balance sheet and large liquid reserves.
Senate Panel Votes to Ban Banks From the Swaps Market - CNBC
Senate Panel Votes to Ban Banks From the Swaps Market - CNBC
A Senate panel on Wednesday voted to ban banks from the lucrative swaps market, one of the strictest measures in a planned financial reform that is heading into the home stretch.
One Republican joined Democrats on the Senate Agriculture Committee to advance a measure that would introduce oversight to the unregulated $450 trillion derivatives market, the source of the worst financial turmoil in 70 years. -1.43 (-5.27%) ], a major credit rating agency, because it has not complied with voluntary requests for information.
A Senate panel on Wednesday voted to ban banks from the lucrative swaps market, one of the strictest measures in a planned financial reform that is heading into the home stretch.
One Republican joined Democrats on the Senate Agriculture Committee to advance a measure that would introduce oversight to the unregulated $450 trillion derivatives market, the source of the worst financial turmoil in 70 years.
"If banks want to be banks, they can remain banks, but they're going to need to spin off that activity," committee chair Blanche Lincoln said after the vote.
But parts of the bill could make it more difficult for regulators to fight fraud and other abuses, SEC Chairman Mary Schapiro said after the vote.
Schapiro said the bill would remove some securities options, exchange traded funds and securities forwards from SEC oversight by treating them as swaps, the SEC chairman said.
"This would be a step backward," she wrote.
The derivatives bill will likely become a part of a sweeping overhaul of financial regulation that is expected to reach the Senate floor soon, though the swaps ban may be stripped out.
Senate Democratic leaders plan to seek a key procedural vote on financial reform legislation Thursday and are aiming for a final vote Monday, a senior Democratic aide said.
At the same time, leaders are awaiting the outcome of continued negotiations over the bill toward a possible bipartisan compromise, said the senior aide and other Senate staffers involved in the closed-door talks.
Democrats control only 59 Senate votes and would need at least one Republican vote for cloture to proceed.
Meanwhile, President Barack Obama will call on the financial industry to get behind regulatory reform in a speech on Wall Street on Thursday, a White House official said.
Previewing the president's remarks, the official said Obama would tell Wall Street to "join him in the effort to reform the financial system—not fight it" and urge lawmakers to pass the legislation under consideration now by the Senate.
Obama is to speak at Cooper Union, where he delivered a speech on financial regulation in 2008 during his presidential campaign.
Democrats see the Wall Street reform as a chance to harness voter anger at big banks ahead of the November congressional elections, while Republicans have switched to a conciliatory tone even though they have the power to block legislation.
Democratic Senator Chris Dodd has been in talks with his Republican counterpart on the Banking Committee, Richard Shelby, to reach a compromise that would avoid a replay of the divisive healthcare battle that consumed Washington for more than a year.
Republican Charles Grassley voted for derivatives restrictions along with the Democrats who control both chambers of Congress, though he said he might still vote against the wider bill on the floor.
Stumbling Block
Democrats need at least one Republican vote to advance the broader reform, but key Republican moderates like Susan Collins have said they will withhold their support until a bipartisan deal has been reached—an effort that could take weeks.
Dodd and Shelby need to resolve how to protect consumers and head off future bailouts—something the Republicans have focused on their criticism so far.
Any proposal that clears the Senate would have to be reconciled with an overhaul passed by the House of Representatives last December.
Lincoln shocked markets last week by proposing banks participating in the swaps market should give up protections like access to the Federal Reserve discount window—a potentially devastating blow which could force them to sell off their lucrative swaps trading desks.
The bill would also require most derivatives to trade on exchanges and pass through clearinghouses.
The proposals are being closely watched by firms that dominate the market, like Goldman Sachs, JPMorgan Chase, Morgan Stanley, Citigroup and Bank of America. It is also important for smaller firms that count on derivatives to hedge their risk.
The head of the Securities and Exchange Commission criticized the bill for removing certain securities options, exchange-traded funds and securities forwards from the agency's oversight.
Dodd Concerned
In an interview with Bloomberg Television, Dodd signaled concerns about the plan to bar banks from the swaps market.
Lincoln's bill is the latest salvo in a barrage of tough measures meant to crack down on Wall Street for the excessive risk-taking that precipitated the recession.
-1.43 (-5.27%) ], a major credit rating agency, because it has not complied with voluntary requests for information. Industry leader Goldman Sachs on Friday was charged with fraud by the Securities and Exchange Commission for misrepresenting a subprime debt produce. French and British regulators are also investigating, and the company could also face a probe from the European Union.
The embattled Wall Street firm has nearly doubled its lobbying budget over the past year and shifted its political contributions from Democrats to Republicans, according to newly released documents.
The International Monetary Fund on Tuesday also proposed two new taxes on banks worldwide as a way to deter risky behavior. Dodd said the United States should act first on regulation to maintain its global competitive edge.
In Obama's Thursday address, he will mention derivatives but they will not be the focus of his speech, a White House spokesman said.
EU Debt Crisis: Sovereign Debt Crisis Likely to Spread: Roubini - CNBC
EU Debt Crisis: Sovereign Debt Crisis Likely to Spread: Roubini - CNBC
The sovereign debt crisis facing Europe, which started in Greece, is spreading to many other large economies in the Organization for Economic Cooperation and Development (OECD), according to New York University professor of economics Nouriel Roubini.
"Public debt sustainability has exploded as a serious issue in advanced economies, most notably in the euro zone's 'PIIGS' —Portugal, Italy, Ireland, Greece and Spain—but also in many larger OECD economies, including the United States," Roubini said in a note posted on his Roubini Global Economics Web site.
The sovereign debt crisis facing Europe, which started in Greece, is spreading to many other large economies in the Organization for Economic Cooperation and Development (OECD), according to New York University professor of economics Nouriel Roubini.
"Public debt sustainability has exploded as a serious issue in advanced economies, most notably in the euro zone's 'PIIGS' —Portugal, Italy, Ireland, Greece and Spain—but also in many larger OECD economies, including the United States," Roubini said in a note posted on his Roubini Global Economics Web site.
As the Greek government meets with International Monetary Fund (IMF) officials in Athens, the man who called the financial crisis warns that Greece's problems will not be solved by any rescue package.
"These issues within the euro zone stem primarily from a loss of competiveness, high wage growth and labor costs which outstripped productivity, undisciplined fiscal policies and, crucially, the appreciation of the euro between 2002 and 2008," he wrote.
Mirroring comments from other bears like George Soros Roubini believes the bailout will not work because it does not address those problems.
Roubini expects the euro zone to underperform the rest of the world in 2010. He predicts the euro zone will grow by just 0.9 percent versus 2.8 percent in the US.
Asia, excluding Japan, is likely to soar ahead this year with growth of 8.2 percent, while Latin American growth will top 4 percent over the course of the year, he predicts.
Tuesday, April 20, 2010
Goldman Sachs earnings: Goldman Profit, Revenue Top Forecasts in Face of Controversy - CNBC
Goldman Sachs earnings: Goldman Profit, Revenue Top Forecasts in Face of Controversy - CNBC
Goldman Sachs blew past consensus forecasts on the top line and bottom line in the first quarter, bank said Tuesday.
The company reported earnings per share of $5.59 in the period, compared with estimates of $4.01. Revenue was $12.78 billion, versus estimates of $11.07 billion by analysts polled by ThomsonReuters.
Goldman Sachs blew past consensus forecasts on the top line and bottom line in the first quarter, bank said Tuesday.
The company reported earnings per share of $5.59 in the period, compared with estimates of $4.01. Revenue was $12.78 billion, versus estimates of $11.07 billion by analysts polled by ThomsonReuters.
Goldman's [GS 163.32 --- UNCH (0)
The company is under investigation by US and European financial regulators after it was charged with fraud by the Securities and Exchange Commission for a debt instrument it created from subprime mortgages.
Goldman denied the SEC accusation, saying it was "completely unfounded."
Company CEO Lloyd Blankfein acknowledged the controversy in the company earnings statement.
"In light of recent events involving the firm, we appreciate the support of our clients and shareholders, and the dedication and commitment of our people," Blankfein said.
But the company is unlikely to be able to escape the shadow of the controversy; shares quickly rose 2 percent in premarket trading just after the release but then retreated and were up just 0.5 percent.
"Unfortunately I fear that no one is going to pay a lot of attention to the earnings," Brad Hintz, senior analyst at Bernstein Research, told "Squawk Box."The real issue will be what will happen to the Goldman franchise with regulators across the world chasing it, Hintz added.
Fixed income was among the brightest sports for Goldman's business compared to expectations, generating $7.39 billion. In keeping with the industry's conservative approach to risk, Goldman's Tier 1 capital ratio grew to 15 percent by the end of the quarter.
Net revenues in trading and principal investments came in at $10.25 billion, 43 percent higher year over year and 60 percent higher than the previous quarter.
Investment banking earnings were a bit lower than some analysts anticipated, generating $1.18 billion, which was 44 percent higher than the same period in 2009 when the financial system was collapsing but 28 percent lower than the previous quarter.
Financial advisory revenue also fell, dropping 12 percent to $464 million on weak mergers and acquisitions activity. Net revenue for equities was $2.35 billion, 18 percent higher than the previous quarter.
As compensation for Wall Street executives becomes increasingly controversial, Goldman said it cut pay and expenses to 43 percent of revenue, compared to 50 percent the previous year. The company said it was the lowest ratio ever for a first-quarter reporting period.
"There's a dose of reality thrust on investors when they see numbers like these, whatever may have happened in the past few days," Michael Holland, founder of Holland and Co., told Reuters. "People who want to use Goldman for political purposes may be putting parts of the business at risk...but overall Goldman has shown with these numbers that they are the best of the best."
Monday, April 19, 2010
Citigroup Posts Profit as Bank Giant Continues to Rebound - CNBC
Citigroup Posts Profit as Bank Giant Continues to Rebound - CNBC
Citigroup provided more evidence that the nation's big banks may have turned a corner, reporting a surprise first-quarter profit Monday as trading revenue offset losses from failed loans.
Citigroup [C 4.86
0.30 (+6.58%) ] says it earned $4.4 billion after payment of preferred dividends. The bank has cited strong trading of bonds, equities and other securities for its big profit. Citigroup, one of the hardest hit banks during the credit crisis and recession, said loan losses fell for the third consecutive quarter. The amount of money it set aside for loan losses also fell.
Citigroup provided more evidence that the nation's big banks may have turned a corner, reporting a surprise first-quarter profit Monday as trading revenue offset losses from failed loans.
Citigroup [C 4.86
0.30 (+6.58%) ] says it earned $4.4 billion after payment of preferred dividends. The bank has cited strong trading of bonds, equities and other securities for its big profit. Citigroup, one of the hardest hit banks during the credit crisis and recession, said loan losses fell for the third consecutive quarter. The amount of money it set aside for loan losses also fell. Citigroup earned 15 cents per share on revenue of $25.4 billion. That easily beating analysts expectations of a slight loss, according to Thomson Reuters.
The bank's stock was down about 1 percent in pre-opening trading. It joined other financial stocks that extended a pullback in response to news that the government was charging Goldman Sachs Group Inc. with civil fraud for mortgage-related transactions.
Citigroup said its total reserves to cover losses from bad loans fell 22 percent, or $2.4 billion, during the quarter to its lowest level in two years. The company reported improvement across nearly all its loan portfolios.
The company reported $8 billion in securities and banking operations, which includes its trading business. That was up $4.7 billion in the fourth quarter.
Citigroup's stock has been rising lately following the government's announcement last month that it would start selling the 27 percent stake in the bank it acquired as part of its bailout of the bank during the credit crisis.
"All of us at Citi recognize that we would not be where we are without the assistance of American taxpayers," Citigroup CEO Vikram Pandit said after reporting the bank's surprise profit.
Citi shares briefly gained 2 percent in premarket trading but then slipped as aftershocks continued from charges the Securities Exchange Commission levied against Goldman Sachs on Friday.
Goldman Sachs Charges: Goldman Execs Were Pessimistic About Housing - CNBC
Goldman Sachs Charges: Goldman Execs Were Pessimistic About Housing - CNBC
It was late 2006, and an argument had broken out inside the Wall Street bank’s prized mortgage unit — a dispute that would reach all the way up to the executive suite.
According to these people, executives up to and including Lloyd C. Blankfein, the chairman and chief executive, took an active role in overseeing the mortgage unit as the tremors in the housing market began to reverberate through the nation’s economy. It was Goldman’s top leadership, these people say, that finally ended the dispute on the mortgage desk by siding with those who, like Mr. Tourre and Mr. Egol, believed home prices would decline.
Such high-level involvement was unusual elsewhere on Wall Street, where many executives spent little time learning the workings of their mortgage businesses or how those businesses might endanger their companies.
It was late 2006, and an argument had broken out inside the Wall Street bank’s prized mortgage unit — a dispute that would reach all the way up to the executive suite.
One camp of traders was insisting that the American housing market was safe. Another thought it was poised for collapse.
Their elite mortgage unit is now at the center of allegations that Goldman [GS 160.70
The Securities and Exchange Commission filed a civil fraud suit on Friday that essentially says that Goldman built the financial equivalent of a time bomb and then sold it to unwitting investors. Mr. Egol, 40, was not named in the S.E.C.’s suit.
Goldman has vowed to fight the S.E.C. But the allegations have left many on Wall Street wondering how far the investigation might spread inside Goldman and perhaps beyond.
Pressure on Goldman mounted on Sunday as two members of Congress and Gordon Brown, Britain’s prime minister, called for investigations into the bank’s role in the mortgage market. Germany also said it was considering legal action against the bank.
According to these people, executives up to and including Lloyd C. Blankfein, the chairman and chief executive, took an active role in overseeing the mortgage unit as the tremors in the housing market began to reverberate through the nation’s economy. It was Goldman’s top leadership, these people say, that finally ended the dispute on the mortgage desk by siding with those who, like Mr. Tourre and Mr. Egol, believed home prices would decline.
Lucas van Praag, a Goldman spokesman, said that senior executives were not involved in approving the Abacus deals. He said that the executives had sought to balance Goldman’s positive bets on the mortgage market, rather than take an overall negative view.
Mr. Tourre, who now works for Goldman in London, declined to comment, as did Mr. Egol, Mr. van Praag said.
Mortgage specialists like those at Goldman were, in a sense, the mad scientists of the subprime era. They devised investments by bundling together bonds backed by home loans, a process that enabled mortgage lenders to make even more loans.
While this sort of financing helped make loans available, the most exotic creations also spread the growing risks inside the American housing market throughout the financial world. When the boom went bust, the results were disastrous.
Such high-level involvement was unusual elsewhere on Wall Street, where many executives spent little time learning the workings of their mortgage businesses or how those businesses might endanger their companies.
The decision to get rid of positive bets on mortgages turned out to be prescient. Unlike most other Wall Street banks, Goldman profited from its mortgage business as the housing bubble was inflating and then again when the bubble burst.
At the heart of all of this is the mortgage trading unit that, at its peak, employed several hundred people. As recently as 2007, Goldman’s mortgage division was split into 11 subgroups, each with a specialty, according to an internal Goldman document that was provided to The New York Times by a former employee.
Together, these groups stood astride the nation’s real estate market. One group, for instance, handled actual home loans. Another provided mortgage advice. A third syndicated loans among banks. And still another handled commercial real estate.
Sunday, April 18, 2010
Al Jazeera English - Business - Toyota to test all SUV models
Al Jazeera English - Business - Toyota to test all SUV models
Toyota will conduct safety tests on all its sport utility models, the Japanese car maker has said, after a US report said there were safety concerns over the company's latest Lexus model.
Japanese media reports said on Thursday that Toyota was also considering a recall of its 2010 Lexus GX 460 in the US, the day after it suspended sales of the vehicle across North America.
The company said it had not yet decided whether to carry out the recall, but was extending the halt on sales of the vehicle to the Middle East and Russia.
Consumer Reports, a US consumer magazine, gave the sports utility vehicle a rare "Don't Buy: Safety Risk" rating after conducting tests on the Lexus GX 460.
"When pushed to its limits, the rear of the GX "slid out until the vehicle was almost sideways before the electronic stability control system was able to regain control," the magazine reported.
"We believe that in real-world driving, that situation could lead to a rollover accident, which could cause serious injury or death," it said.
Reputation blow
Toyota says it has not experienced any similar problems in its own tests.
"Our engineering teams are vigorously testing the GX using Consumer Reports' specific parameters to identify how we can make the GX's performance even better," the company said.
A Toyota spokeswoman said a number of tests are now being conducted on all the company's sport utility vehicles models, including Land Cruisers and Sequoias.
"The foremost reason for doing the extra tests is to put customers' minds at ease," Ririko Takeuchi, the spokeswoman, said.
Toyota has sold about 5,400 of the Lexus GX 460 SUVs in the four months it has been on the market.
But even though the vehicle is not a high-volume model, analysts say the concerns could be another blow to the reputation of Toyota and its luxury car brand.
"Even though the vehicle's volume is a relatively small part of [Toyota's] sales, as Toyota's quality issues are now affecting Lexus too, we think the cost to repair the dented brands is poised to rise," Efraim Levy, an S&P equity analyst, said.
Toyota has recalled more than nine million vehicles worldwide, including more than six million in the United States since late 2009, mainly for acceleration problems but also for some faulty brakes on some hybrid vehicles.
Thursday, April 15, 2010
Wednesday, April 14, 2010
Tuesday, April 13, 2010
EU Debt Crisis: Pimco to Shun Greek Bonds; Will Others Follow? - CNBC
EU Debt Crisis: Pimco to Shun Greek Bonds; Will Others Follow? - CNBC
Pimco's Mohamed El-Erian says the world's biggest bond fund will not take up the latest Greek bond auction despite the new rescue package from the European Union. The CEO of Pimco believes the terms of the package fail to tackle the euro zone member's long term finances and solvency.
Pimco's Mohamed El-Erian says the world's biggest bond fund will not take up the latest Greek bond auction despite the new rescue package from the European Union. The CEO of Pimco believes the terms of the package fail to tackle the euro zone member's long term finances and solvency.
The news is likely to come as a major blow to the government in Athens which will try and raise 1.2 billion euros ($1.6 billion) in 6-month and 1-year treasury bills on Tuesday and has to raise 11 billion euros by the end of May.
Pimco's decision is also likely to affect the Greek government's debt issuance plans ahead of a US road show later this month, Simon Derrick from Bank of New York Mellon told CNBC's Squawk Box Europe.
Greece plans to raise between $5 billion and $10 billion in dollar-denominated bonds, and a road show was planned for the last week of April.
But Pimco would have been one of the road show's major targets and could make others consider whether to buy into any offering in the US market and beyond, Derrick said.
The market is clearly not convinced by the terms of the rescue package, said Andy Brough, a hedge fund manager from Schroders.
Sunday, April 11, 2010
Thursday, April 8, 2010
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Monday, April 5, 2010
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