Tag Archives: Bank of America

Kim Jong-un ‘has ordered North Korean hackers to rob World Bank, Bank of America’

North Korea has reportedly told its army of hackers to target major world banks and rob them.

This is according to the New York Times, which lists the Bank of America and the European Central Bank as targets for the country’s cyber-criminals.

Continue reading Kim Jong-un ‘has ordered North Korean hackers to rob World Bank, Bank of America’

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It’s Time To Talk About That Other Thing That Destroyed Wall Street Earnings

woman new york city bags grocery cart cans garbage

All of the big American Wall Street banks have reported their fourth-quarter earnings, and you can pretty much use one word to describe them — rotten.

Most of the talk has centered on a full-on rout in trading revenue, especially in the bond, currency, and commodities markets. Citi’s trading revenue was down 14% overall from the same time last year. JPMorgan Chase’s bond trading revenue fell 23% from the same time last year.

Even Goldman Sachs, the only bank to eke out an earnings beat, saw its bond-trading revenue fall 29%. It was the talk of Goldman’s conference call — the fact there was a difference between good volatility in markets (just a touch) and bad volatility in markets (too much).

But while the focus on trading revenue makes for sexy headlines, it leaves out one big unsexy factor that decimated bank earnings. Yes, we’re talking about legal costs.

Perhaps people are simply tired of talking about this factor, because a lot of the transgressions banks are paying for date back to the financial crisis. Perhaps cynics are just tired of repeating the phrase “cost of doing business.”

Here’s the scoreboard for you:

  • Bank of America shelled out $393 million for legal expenses, down from $2.3 billion a year before. That said, in the third quarter the bank shelled out $5.6 billion for legal costs — so there’s that.
  • JPMorgan’s legal expenses held steady for the fourth quarter of 2013 and 2014, roughly hovering at about $1 billion.
  • Goldman Sachs fared better, spending $161 million legal expenses in the fourth quarter of 2014, down from $561 million at the same time last year and $194 million the previous quarter.
  • Citigroup’s legal expenses increased from the same time last year to $3.5 billion from $1 billion. In the third quarter of 2014 the bank spent $1.3 billion on legal expenses.
  • Morgan Stanley’s legal expenses aren’t totally clear. We know only that the bank spent $284 million “for legacy residential mortgage related matters” and that “Non-compensation expenses of $2.8 billion decreased from $4.1 billion a year ago, primarily reflecting lower legal expenses.”

It looks bad, sure, but we’ve seen worse.

The issue is that, seven years after the crisis, Wall Street is starting to settle into a new normal.

Eric Thayer/Reuters

If these legal issues — some from the crisis, some not —  are merely the “cost of doing business,” then it’s starting to look as if business is costing too much. Two or three years ago it seemed clear that these fines would, sooner rather than later, become a thing of the past. A big Wall Street bank would announce a massive legal cost, and that bank’s stock wouldn’t move an inch. Investors didn’t really care.

But that kind of thinking is becoming increasingly problematic as it is clear these expenses actually do matter, and this quarter is an excellent example of why. Combine a weak quarter in trading (or equity underwriting, or any other sector of the business) along with legal costs, and all of a sudden you have a nasty cocktail of big-bank failure. With these legal costs as they are, it doesn’t take much to tip the scales.

Trading issues happen — the market is cyclical and every trader will tell you that one minute you’re killing it, and the next minute you’re getting your face ripped off. That’s natural. The mess that those losses make when combined with legal expense, however, is not so natural.

The longer this goes on, the more people will catch on to that.

The Bank Of America Employee Suspected Of Killing 2 Hookers Left Chilling Emails At Work

Rurik Jutting

Police are examining thousands of images on the mobile phone of Rurik Jutting, the former Bank of America Merril Lynch structured equities employee who has been arrested following the discovery of two dead women in his Hong Kong apartment, according to Australia’s News.com.

They will also look at a chilling email message that Jutting used as his out-of-office autoreply, according to Bloomberg:

An automated e-mail reply from the Bank of America Corp. (BAC) account of Rurik Jutting yesterday said he was out of the office “indefinitely” and recommended contacting someone who’s not “an insane psychopath.”

… The automated reply also said: “For escalation please contact God, though suspect the devil will have custody. [Last line only really worked if I had followed through..]”

Police will also look at his Facebook page status updates to establish a timeline of his activities before his death. Among those posts are an image from the Daily Mail stating “money does buy happiness,” an image that appears to be from the balcony of a high-rise apartment building like the one Jutting lived in, and a selfie of Jutting with an attractive female friend.

As they do so, we’re beginning to learn more details about what happened in the high-rise apartment of the man authorities say nearly decapitated one woman and kept the body of another for days in a maggot-filled suitcase.

But it is likely to be his phone and social media will provide the major evidence in the case, according to News.com:

Police were scouring thousands of photographs stored on a mobile phone seized from the suspect, including some showing one of the corpses wrapped in a carpet inside a suitcase on the balcony, the South China Morning Post reported.

rurik jutting

“Stepping down from the ledge. Burden lifted; new journey begins. Scared and anxious but also excited. The first step is always the hardest,” said the posting uploaded to Facebook on Monday.

Rurik George Caton Jutting, 29, was arrested Saturday at his apartment in the Wanchai district of Hong Kong, according to The Financial Times:

The body of a young woman was found on the floor of his bloodstained flat, where a knife was recovered by police. Hours later, police discovered a second body. Both women were reported to be sex workers, one of Indonesian origin, according to local media.

One of the women has since been identified as 25-year old Sumarti Ningsih, who police say was killed on October 27. The other woman has not been named.

“Police sped to the scene and an unconscious woman aged 25 to 30 was found lying inside the unit. Sustaining cut wounds to her neck and buttocks, the woman was certified dead at the scene,” the Hong Kong police said in a weekend statement. “In the course of investigation, police found a suitcase at the balcony of the unit, and a female dead body with neck injuries was found inside the suitcase.”

Jutting graduated from Cambridge University and began working for BofA in Hong Kong in the summer of last year, according to his LinkedIn profile. He previously worked for BofA and Barclays in London.

He was also jilted by a fiance in 2012 who cheated on him in 2012, according to The Telegraph.

Rurik Jutting victimsThe TelegraphThe Telegraph reports that these women were Jutting’s victims.

The two victims were Indonesian sex workers, according to the BBC.

The BBC’s Hong Kong correspondent Juliana Liu reported that the two victims were known as Jesse and Alice.

Both were well known in the Wan Chai entertainment district, our correspondent said.

Bloomberg named one of the victims as “Ningsih”, and said she was on an Indonesian tourist visa.

Police are looking at Jutting’s phone “in a bid to identify further potential victims,” The Telegraph said.

Jutting came from a privileged background. His parents live in a massive house in Surrey, according to The Daily Mail, which also said he enjoyed skiing and visiting trendy clubs in London’s Shoreditch neighbourhood:

He enjoyed skiing holidays in Courchevel, the Alpine playground for the elite, and when in London he relaxed at a private members’ club in Shoreditch.

The son of an engineer father and a nursery teacher mother, Jutting was described by one colleague in Hong Kong as someone who ‘talked very loud and made loads of money’.

As a boy he attended Winchester College, a private school, before going to Cambridge to study history and law, according to The Telegraph. He was in the rowing club and was secretary of the history society, The Telegraph said.

His Hong Kong flat contained cocaine, The South China Morning Post said, and the FT reported that it is located near the city’s red light district:

Mr Jutting’s apartment in the J-Residence tower block in Wanchai – where rents are around HK30,000 a month – is just a short walk away from one of Hong Kong’s best-known party districts, famous for its all-night bars and clubs. The area is popular with expats and tourists, and is home to one of Hong Kong’s main red light districts.

Apple Isn’t Disrupting Credit Card Companies, It’s Giving Them A Huge Gift

Apple Pay

The announcement of Apple’s new Apple Pay service marks another big gun — the biggest, probably — entering the mobile payments space. Those expecting Apple to disrupt the tri-opoly of MasterCard, Visa and American Express will be sorely disappointed.

While tech startups in the mobile payments business talk frequently about replacing the traditional banking and financial services industry, Apple probably sees that as a fight that’s simply not worth having.

Apple has teamed up with all three card issuers, as well as Bank of America, Capital One Bank, Chase, Citi and Wells Fargo — the six major card-issuing banks in the U.S., representing 83% of credit card purchase volume in the country.

Their support for Apple Pay suggests the package is likely to be complementary to, rather than in competition with, their business models.

Mobile payments

Forrester Research forecasts that the mobile payments market will be worth some $90 billion by 2017. Given the ubiquity of Apple products in the West, it occupies an almost unique position from which to gain market share quickly.

But why not go it alone? Instead of using credit and debit cards to fuel Apple Pay, why not simply link Apple Pay directly to checking accounts, the way PayPal does? That would be a true disruption of the credit card business.

Moreover, with some $164.5 billion in cash or cash equivalents on its balance sheet as at the end of June, it has more than enough ready capital to provide the necessary confidence to make a bespoke payment system work.

One answer is that the shift to mobile payments may be a gradual one. In a survey released by the Federal Reserve in March, only 17% of mobile phone users report that they made a mobile payment in the past 12 months. That’s up a meager 2% from 2012.

At this stage, having the ability to pay using your iPhone might be a nice additional feature but it’s unlikely (yet) to be the major selling point. Instead, despite the fanfare, Apple Pay may be more of a transitional stage designed to keep potential mobile competitors out while the company waits for market to build.

This will have been top-of-mind for Apple executives with China’s Alibaba Group preparing for what could be the largest IPO in U.S. history. The firm is reportedly looking to regain a stake in its e-commerce arm Alipay, spun off in 2011, after it processed some $519 billion-worth of payments in 2013.

Unlike Apple, Alipay has gone toe-to-toe with large Chinese banks over control of payment services. Market research firm iResearch estimates that Alipay has over 400 million users and is one of the dominant players in mobile payments in China.

With an established player in the space poised to enter the U.S. market, Apple may have felt that presenting a united front would be advantageous rather than starting a war that could leave the door open to new entrants.

This may be bad news for retailers in the short term, as they will have to continue paying transaction fees for credit card payments. And for consumers the popularity of the service will rely on convenience rather than cost.

But success in a competitive space means picking the right battles, and Apple has clearly decided that it wants to fight with the credit card companies, not against them.

Richard Branson’s Bank to List on London Stock Exchange to Tune of £2bn

Chinese banned from Virgin's Galactic Flights
Sir Richard Branson’s Virgin Money bank could be floated on the stock market as early as October this year.(Reuters)

Virgin Money is poised for floatation as early as October

Virgin Money, the banking arm of Sir Richard Branson’s Virgin Group, could be floated on the London Stock Exchange as early as October.

A report by Sky News revealed that the directors of Virgin Money are in talks with advisers about announcing an intention to float within two months, as they look to exploit strong current trading and investors’ appetite to buy shares in the company.

A stock market listing of the bank could value it at up to £2bn ($3.3bn, €2.5bn), say City insiders.

A final decision about the timing of an initial public offering (IPO) will not be taken for several weeks, and it remains a strong possibility that Virgin Money could opt to wait until next year, according to a source close to the company.

We have grown the business strongly, exceeding market growth in both our core mortgage and savings business, and returned to profitability.” – Jayne-Anne Gadhia, Virgin Money CEO

If Branson does pull the trigger on a listing this year, Virgin Money, which has more than four million customers, would become the third ‘challenger bank’ to sell shares on the London Stock Exchange this year.

OneSavings was listing during the spring, while TSB was listed after it was spun out of Lloyds Banking Group as part of the bank’s aid settlement with Brussels, following its taxpayer bailout in 2008.

Another new lender, Aldermore, is also planning a floatation this autumn, say Sky News, and could announce its plans around the same time as Virgin Money.

Virgin Bank float is early

Branson’s plan to float his banking business has been well-documented, though it was not expected to happen as early as this year.

Virgin Money has been performing strongly in recent months, say banking insiders, with a new current account making strong progress in Scotland and Northern Ireland before its wider nationwide launch.

Jayne-Anne Gadhia, Virgin Money’s chief executive, said in July that 200 new jobs would be created by the business this year.

“We have grown the business strongly, exceeding market growth in both our core mortgage and savings business, and returned to profitability,” she said.

Last year, Virgin Money made an underlying profit of £53.4m in 2013, compared to a £2.5m loss the year before.

The bank has not yet made any official statement on the potential timing of a flotation, which is being handled by Bank of America Merrill Lynch and Goldman Sachs.

Goldman gives junior bankers 20% pay rise

The Goldman Sachs logo is displayed at the company's booth on the floor of the New York Stock Exchange in New York, US, on Friday, July 19 2013

Goldman Sachs is increasing salaries for junior bankers in the US by about 20 per cent in an increasingly frenetic war to attract and retain young graduates.

Some first-year employees will see their salaries increase to about $85,000, according to people familiar with the matter. The change does not affect bonuses, which can equal the salary. It does not affect every new recruit, and is not being rolled out internationally.

Wall Street banks, which have been trying to rein in overall remuneration costs, have come under pressure to improve salaries for their junior staff. Rivals, including Morgan Stanley, have already moved to increase base pay.

Many bankers complain that, while they may be receiving a large bonus in deferred stock, they need cash to spend on expensive Manhattan rents.

The move comes amid a broader reappraisal of pay and conditions at large banks, which are having to deal with private equity firms poaching their staff, Silicon Valley technology companies looking for talent and the death of a Bank of America intern who was working long hours.

BofA announced last month that it would hire more junior staff in an attempt to improve the work/life balance of its bankers. Several banks have attempted to limit work at weekends. Goldman has taken this approach and warned of disciplinary consequences for bankers who breach the new rules.

Last October Goldman announced the findings of a “junior banker task force” set up to improve conditions.

Its proposals included hiring more entry-level employees, called analysts, and providing additional opportunities for these analysts to spend time with their managers and clients.

“The goal is for our analysts to want to be here for a career,” said David Solomon, Goldman’s co-head of investment banking. “We want them to be challenged, but also to operate at a pace where they’re going to stay here and learn important skills that are going to stick. This is a marathon, not a sprint.”

In 2012 Goldman ended two-year contracts and bonuses for analysts at its investment banking operations. The move to give these junior bankers full-time employment contracts from the start was designed as a way to prevent them from being poached by hedge funds and private equity groups.

US banks draw up early plans for move to Ireland if UK leaves EU

Canary Wharf
Canary Wharf, part of London’s financial district

Wall Street banks are drawing up preliminary plans to move some London-based activities to Ireland to address concerns that the UK is drifting apart from the EU.

People familiar with Bank of America, Citigroup and Morgan Stanley said that they considered Ireland a favourable location for some of their European business if they needed to move them out of the UK. One said he was already planning to move some activities to Ireland.

The people said their plans were in most cases still at very early stages. But they said the US banks had started preparing for the euro zone’s impending banking union that threatens to isolate Britain and, ultimately, for a possible UK exit from the EU.

People familiar with Bank of America, Citigroup and Morgan Stanley say they have considered Ireland a favourable location for some of their European business if they need to move them out of the UK. Photograph: Bobby Yip/Reuters
People familiar with Bank of America, Citigroup and Morgan Stanley say they have considered Ireland a favourable location for some of their European business if they need to move them out of the UK.

“I’m frankly looking at moving some activities to Ireland,” said one senior UK-based manager at a Wall Street bank. “I think the Irish Central Bank and Government would welcome this. It is not so much Brexit, more about legal entity optimisation.”

Most US and Asian banks have chosen to base their main European operations in the UK, giving them an automatic passport to carry out their services across all 27 countries in the EU.

But senior US banking executives said the UK was unlikely to be granted the same “passporting” rights if it left the EU – the “Brexit” scenario.

Passported activities

Executives at American banks in Europe are reluctant to speak publicly about the issue for fear of upsetting the UK regulators. One said: “I don’t think people are making enough of it – a lot of passported activities that cannot take place in London will not exist here any more.”

As the European Central Bank prepares to take charge of the biggest banks in the euro zone later this year, there are fears among some executives at US banks that this will drive a wedge between the UK and the rest of Europe’s financial system.

Britain is already challenging an ECB policy in the European Court of Justice that would force clearing houses handling euro-denominated transactions to decamp from London to the euro zone.

The UK hosts more than 250 foreign banks and last year it generated a financial services trade surplus of $71 billion, about a third of which came from trade with the EU, according to TheCityUK, a financial lobby group.

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