Receiving Wide Coverage ...
Downsizing: Bank of America is selling its stake in China Construction Bank for up to $1.5 billion, reports the Journal, which obtained a term sheet on the deal. The bank has yet to comment on the reason for the sale, but the article notes "market experts remain wary about Chinese banks' asset quality after a huge credit boom in China aimed at stimulating the country's economy in the last few years." Bank of America isn't the only big bank scaling back. The Journal also reports that last week Citigroup sold Citi Venture Capital International, a $4.3 billion private-equity fund, for an undisclosed price to private-equity fund Rohatyn Group. The paper estimates Citi has shed more than $6 billion in alternative investments over the last month and anonymice say the big bank is also looking to sell its remaining hedge fund to those that manage it. "The moves reflect a decision by Citigroup to shed its private-equity and hedge funds in the wake of new regulations that restrict banks' holdings of alternative investments," the paper reports before name-dropping the yet-to-be-finalized Volcker Rule, which, among other things, prohibits banks from investing in funds they don't manage.
Wall Street Journal
Here's a bit of good news for small banks: their loan growth is outpacing the loan growth at large financial institutions, due mostly to the regulatory uncertainty that persists at big banks. "Regulation has tilted the odds," one analyst tells the paper. "The last thing [large banks] want to do is build their balance sheets."
In case you somehow have yet to hear, banks' "princelings" hires currently the subject of one of the very many probes going on over at JPMorgan Chase were widespread in China. "The Justice Department and the Securities and Exchange Commission are trying to determine whether the banks' hiring practices violated U.S. laws against paying bribes overseas," the paper cryptically notes. "The scrutiny goes beyond the probe disclosed by [JPM] in August." The article goes on to name relatives of high-ranking government officials that were hired by Bank of America, Citigroup and Goldman Sachs, but doesn't specify whether any of these hires might actually be under federal investigation.
U.S. hedge funds are criticizing Co-operative Bank "for refusing to engage with them" ahead of its debt restructuring. Scan readers will recall that the U.K. firm asked subordinated bondholders to swap their debt securities for shares in the bank as part of its efforts to raise an additional $2.4 billion in capital in June. Co-operative recently revealed "it would only formally negotiate with bondholders once it had finalized the terms" of the debt exchange later this year.
In somewhat related news, global regulators, including Bank of England Governor Mark Carney, "are seeking support from world leaders to draw up proposals to force banks to hold a minimum amount of debt that can be 'bailed in' if a bank collapses."
Banking editor Patrick Jenkins notes "bank chief executives, returning from their holidays this year" should take advantage of the current optimism in the markets.
New York Times
Big banks, including JPM, Morgan Stanley, Bank of America Merrill Lynch and Barclays, are expected to reap the financial benefits of Verizon's buyout of longtime partner Vodafone, announced over the holiday weekend. "Advisers to Verizon could earn $110 million to $125 million, while bankers for Vodafone could reap $100 million to $118 million, according to estimates from Freeman & Company," the article notes.
Columnist Allan Sloan predicts measures put in place after the 2008 financial crisis won't stave off the next one. "We should have broken up and simplified giant financial institutions that hold federally insured deposits and limited their ability to get themselves (and U.S. taxpayers) into trouble," he writes. "Instead, we got the hideously complex Dodd-Frank legislation, passed three years ago, which requires all sorts of ultra-complex rule-making."