Archive for  November 2014

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(Bloomberg) Investment-grade corporate debt sales have surged to a record $1.15 trillion this year as the most creditworthy borrowers flocked to the U.S. bond market to take advantage of historically low interest rates.

Apple Inc. (AAPL), Verizon Communications Inc. and Oracle Corp. were among borrowers that helped swell issuance this year. JPMorgan Chase & Co. was the the top underwriter for the fifth-straight year, grabbing 12.7 percent of the deals, according to data compiled by Bloomberg.

Alibaba Group Holdings Ltd., Asia’s biggest Internet company, led borrowings of more than $126 billion this month that helped sales breach last year’s record of $1.13 trillion. Companies have raced to the market to lock in borrowing costs that remain within 0.5 percentage point of the all-time low of 2.65 percent reached in 2013, Bank of America Merrill Lynch index data show.

Investors purchasing the debt have reaped 7.3 percent gains in 2014, overcoming the 1.5 percent loss last year, index data show. Investment-grade bonds are rated above Ba1 by Moody’s Investors Service and BB+ at Standard & Poor’s.

Apple’s seven-part, $12 billion offering in April was the biggest deal recorded this year as the maker of iPhones and iPads returned to the debt market to raise money for its enhanced shareholder-reward program. The company also debuted euro-denominated bonds earlier this month.

(efinancial) It’s that time of year when line managers in banks look at their depleted bonus pools and then look at their headcounts. If people are to be happy, then either one must grow or one must shrink. Usually it’s headcounts that shrink. And usually it’s expensive senior staff who are at the forefront of the shrinkage. This year, Citi seems to be playing the game to a tee.

Following last week’s revelation that staff are being exited from Citigroup’s markets division two months before bonuses are announced, the Financial Conduct Authority (FCA) has updated its register to reflect some of the recent exits. The FCA Register doesn’t clarify why people left Citi – they could have left entirely of their own accord, but it does show that they have stopped working for the bank in the UK. Departures include: Caroline Clarke, the global head of specialist sales at Citi, who has gone to become head of corporate relations at Autonomous, the independent research company, Nicolaus Von Habsburg, a director-level interest rates salesman hired by Citi from Morgan Stanley in 2010, along with Stephen Reid and Scott Harris, two other directors in the London office.

At the same time, the FCA Register suggests that Citi has made two junior hires in the past week or so. They are: Muriel Perren, a credit researcher focused on the financials sector from Morgan Stanley and Claude Stéphanie Ngningha, an associate in M&A from Rothschild.

Citi didn’t immediately return a call on its staff changes. However, this would not be the first time that the US bank has dropped senior staff just before bonuses. It made layoffs on the trading floor in December 2011 and December 2012. At least it has form.

[NEW YORK] Royal Bank of Scotland Plc’s securities unit will now exit its US mortgage trading business after originally planning to shrink it by two-thirds.

Exiting mortgage backed-security, commercial real estate and commercial mortgage-bond sales and trading “is a necessary part of repositioning our US business,” an RBS spokesman said in an emailed statement.

RBS said in May it will eliminate hundreds of jobs in the United States over the course of two years to help reduce assets ahead of new rules by the US Federal Reserve.

The largest foreign banks, with US$50 billion or more in US assets, need to set up an intermediate holding company subject to the same capital, risk management and liquidity standards as US banks, the Fed said in February. “We have made significant progress against our goals and are well ahead of plan,” the RBS spokesman added. “We continually evaluate all aspects of our business on a regular basis to ensure we are strategically positioned to deliver optimal results to our clients and shareholders.” The company plans to retain its non-mortgage asset backed securities team.

(bloomberg) Morgan Stanley Chief Executive Officer James Gorman said the U.S. bank is paying staff “competitively” after managers turned the business around over the past five years.

Gorman, speaking in an interview in Singapore today with Bloomberg Television’s John Dawson, cited four or five years of growth “and profitability continuously improving.”

“We have a tremendous management team,” said Gorman, 56. “I think they’ve been killing themselves for five years turning this thing around and it’s worked. And, God bless them, they deserve all that comes from that success.”

Morgan Stanley reported last month that its third-quarter earnings almost doubled to $1.69 billion, beating analysts’ estimates, on higher revenue from trading stocks and bonds. The company’s revenue from equities trading beat Goldman Sachs Group Inc.’s for a third straight quarter and by the widest margin in at least three years.

Gorman is in Singapore to attend the annual Asia-Pacific summit hosted by Morgan Stanley (MS) in the island nation.

In the first nine months of 2014, Morgan Stanley’s investment-banking unit posted the biggest jump in revenue among its four largest U.S.-based Wall Street rivals, a good sign for employees seeking higher bonuses. Gorman has tried to boost returns from fixed-income trading even while reducing staff and capital alloted to the unit.

Photographer: Bryan van der Beek/Bloomberg

The chief executive’s comments today contrast with January 2012, when he said that employees of the New York-based bank would be “naive” if they didn’t understand the need for pay cuts in an industry reshaped after the global financial crisis. At the same time, once the bank started to perform again, “compensation will reflect that,” he said then.

Morgan Stanley, the owner of the world’s biggest brokerage, set aside $12.7 billion in the first nine months for compensation expenses, 4 percent more than a year earlier. Those costs jumped 6 percent in the third quarter, “primarily driven by higher revenues,” the company said Oct. 17.

(Bloomberg) Goldman Sachs Group Inc.’s new class of 78 so-called partners spotlights the shrinking role of trading, the growth of other businesses and one area where progress is slow: the addition of women to its highest ranks.

Employees in the trading and research divisions comprise 36 percent of the class, down from 44 percent two years ago, according to the New York-based company. An industrywide slump has driven down Goldman Sachs’s trading revenue to $12 billion in the first nine months of the year, from $27.5 billion in the same period of 2009 and $18.2 billion in 2010.

All other divisions had more partners named than they did in 2012, including three more each in investment banking and asset management. Revenue in both of those segments rose more than 35 percent from the first nine months of 2009.

Goldman Sachs spends months vetting candidates for selection as a partner, a nod to the firm’s 130 years as a private partnership that ended with a 1999 public offering. Partners, also known as participating managing directors, typically receive a $900,000 salary, a cut of a special bonus pool and the opportunity to invest in private funds.

There are 11 women in the new class, or 14 percent of the total, the same percentage as in 2012, the company said yesterday. That’s consistent with its management committee, where five of the 34 members are female. Last year’s class of managing directors, the title just below partner, was 20 percent women, down from 23 percent in 2012.

Hiring Women

Goldman Sachs has highlighted the need for women in the workforce through its 10,000 Women philanthropic program that has sought to build on the work of Kathy Matsui, the firm’s chief Japan equity strategist and a partner who coined the term womenomics in 1999.

The percentages at the highest levels trail the firm’s broader population, as 36 percent of Goldman Sachs’s U.S. workforce is female. Still, it’s an increase from when the bank was a true partnership. After the 1998 class was elected, 6 percent of the firm’s 246 partners were women.

Goldman Sachs has added senior women from other firms. Of the five bankers it hired as partners since the last class, two are female. The firm added Kate Richdale from Morgan Stanley in 2013 and A.J. Murphy from Bank of America Corp. earlier this year.

Special Situations

Among the smaller group of traders promoted this year, at least three work in areas that make long-term investments using the firm’s own money. That area that has grown as regulations required the bank to scale back its investments in private-equity and hedge funds.

Tavis Cannell and Maxim Klimov have worked in Europe in the special situations group, a unit that invests in a range of assets, from middle-market loans to illiquid debt to equity stakes in private companies. Thomas Tormey is the co-head of Goldman Sachs’s distressed investing unit.

At least four of the investment bankers work with technology firms, including Dan Swift, co-head of technology, media and telecom banking for Asia. At least three were in leveraged finance, including at least two in Europe, where Goldman Sachs has highlighted opportunities to increase financing as European banks pull back.

Also included among the bankers promoted was Umesh Subramanian, the investment banking division’s head of strats, a group with technology and quantitative backgrounds that reports to Chief Information Officer Martin ChavezDavid Solomon, co-head of the investment banking unit, said he plans to use technology to boost the division’s pretax margin, which is set to rise for a fourth straight year, Sandler O’Neill & Partners LP analysts said in a note last week.

Stock Options

The new promotions take effect Jan. 1, and the total number of partners — about 467 — will amount to 1.6 percent of full-time employees, compared with 1.7 percent after the last round, according to David Wells, a Goldman Sachs spokesman in New York.

Partners collectively owned about 8.5 percent of the firm’s stock as of Aug. 13, the lowest since 2010. The stake has dropped from more than 11 percent at the beginning of the year, largely because they exercised stock options granted in 2008, reaping about $390 million after the share price doubled since the financial crisis.

The following is the list of people who were named to become partners as of Jan. 1:

Fadi Abuali Aaron Arth Jennifer Barbetta Thomas Barrett Gerard Beatty Shane Bolton Will Bousquette Kane Brenan Tavis Cannell T.J. Carella Gary Chropuvka Darren Cohen Stephanie Cohen Kathleen Connolly Sara Devereux Iain Drayton Carlos Fernandez-Aller Jonathan Fine Meena Lakdawala Flynn David Friedland Jan Fritze Dino Fusco Huntley Garriott Jeff Gido Littleton Glover Cyril Goddeeris Alexander Golten Jason Gottlieb Joanne Hannaford Julie Harris Edouard Hervey Matthias Hieber Charles Himmelberg Sean Hoover Pierre Hudry Irfan Hussain Kevin Kelly Tammy Kiely Maxim Klimov Edward Knight Etsuko Kobayashi Nyron Latif Greg Lee Dirk Lievens Kyri Loupis John Madsen Richard Manley Michael Marsh Ali Meli David Miller Joseph Montesano Eric Muller Manikandan Natarajan Fergal O’Driscoll Kristin Olson Jernej Omahen Nicholas Phillips Rob Pulford Colin Ryan Carsten Schwarting Kunal Shah (London) Richard L. “Jake” Siewert Jason Silvers Kevin Sterling Umesh Subramanian Dan Swift Ben Thorpe Oliver Thym Joe Todd Hiroyuki Tomokiyo Thomas Tormey Mark Van Wyk Rajesh Venkataramani Matthew Verrochi Owen West Ronnie Wexler Xiaoyin Zhang Adam Zotkow.