Goldman Sachs bankers said to depart on guidelines breach

Three bankers have left Goldman Sachs Group Inc after the US firm determined they breached internal guidelines in connection with the bank's advisory role on the planned acquisition of a consumer company in the Middle East, according to people with knowledge of the matter.

PHOTO: REUTERS

FEB 12, 20164:09 PM

[LONDON] Three bankers have left Goldman Sachs Group Inc after the US firm determined they breached internal guidelines in connection with the bank's advisory role on the planned acquisition of a consumer company in the Middle East, according to people with knowledge of the matter.

The bankers who departed in December were involved in advising a potential buyer on an investment in fast-food company Kuwait Food Co, which operates KFC restaurants in the Middle East, said the people, who asked not to be identified because the matter is private. Two employees were based in Dubai and another in London, the people said.

Goldman Sachs determined that two of the bankers didn't identify themselves as bank employees at a meeting with the target company attended by other financial services firms, the people said.

The third banker was aware that colleagues participated in the meeting, two of the people said, and all three were deemed to not have adhered to the firm's internal guidelines. Other employees were also allegedly disciplined as a result of the incident.

See who is talking about GOLDMAN SACHS

Last 30 days:

• 36232
• 316
• 1655

30 days avg

HOT COMPANIES

Rolls-Royce +542% messages

• Rio Tinto +109%
• GlaxoSmithKline +80%
• Burberry +64%
• Aberdeen +39%
• RSA Insurance +37%
• Shire +28%
• Carnival +25%
• ARM Holdings +17%
• Hikma Pharma +16%

• Rio Tinto +109%
• GlaxoSmithKline +80%
• Burberry +64%
• Aberdeen +39%
• RSA Insurance +37%
• Shire +28%
• Carnival +25%
• ARM Holdings +17%
• Hikma Pharma +16%

"We take these matters seriously and act appropriately based on the standards we expect of our people," Goldman Sachs said in a statement on Wednesday. The bank declined to name the employees or elaborate further.

Tighter Controls

Goldman Sachs set up a business-standards committee in 2010 that has emphasized the need for employees to be transparent with clients on the firm's role and potential conflicts of interest on transactions.

Global securities firms are tightening controls on staff and clamping down on potential violations and misconduct as legal costs spiral and as regulators take a harsher stance toward inappropriate behavior in the financial sector.

Last year, the bank dismissed about 20 analysts globally in offices including London and New York after discovering they had breached rules on internal training tests, said people familiar with the matter in October.

Goldman Sachs is advising a Dubai-based investor group led by Emaar Properties PJSC Chairman Mohamed Alabbar, which plans to buy a 69 per cent stake in Kuwait Food, known as Americana, according to the people.

The transaction was announced earlier this month. An e-mail to a representative for Emaar Properties wasn't immediately answered.

Americana, which couldn't be immediately reached for comment on the Goldman incident, operates restaurant franchises such as KFC, TGI Friday's and Pizza Hut in the Middle East and North Africa region. Founded in 1964, it also produces food including California Garden beans and Farm Frites frozen vegetables.

Goldman Sachs, the No 1 adviser on mergers in Middle East and Africa, generated US$3.47 billion globally in advisory fees for 2015, the most since 2007. The bank was the top-ranked adviser on mergers and acquisitions worldwide last year, according to data compiled by Bloomberg.

BLOOMBER
G

Templeton's US$5.9b bet on Brazil bonds paying off in 2016

While most investors were beating a furious retreat from Brazil in the final three months of last year, Franklin Templeton's Michael Hasenstab was busy more than doubling his investments in the crisis-ridden nation's debt to US$5.9 billion. 

PHOTO: BLOOMBERG

FEB 12, 20165:16 PM

[LONDON] While most investors were beating a furious retreat from Brazil in the final three months of last year, Franklin Templeton's Michael Hasenstab was busy more than doubling his investments in the crisis-ridden nation's debt to US$5.9 billion.

So far this year, the wager is paying off. The real-denominated bonds have returned 4.7 per cent in dollar terms in 2016, versus an average loss of 0.13 per cent for local-currency debt in emerging markets. 

The gains are in stark contrast to last year's rout, when Brazilian securities plummeted 33 per cent as the currency sank, a recession deepened and impeachment proceedings against President Dilma Rousseff began.

Mr Hasenstab's Brazil bet is flourishing four months after he said in a blog post that a selloff in emerging markets was creating "multi-decade opportunities."

He isn't the only fund manager at Franklin Templeton who shares that view.

Just last week, Mark Mobius, the chairman of the firm's emerging-markets group, said at an event in Sao Paulo he was increasing investments in Brazil in anticipation of a turnaround.

Many investors still remain skeptical, especially with Brazil poised for its deepest two-year recession in more than a century.

"It's too early to get back in the game there," said Sean Newman, a money manager at Invesco Advisers Inc, which oversees US$776 billion. Assets are "going to get cheaper."

He said the Brazilian real hasn't fully adjusted to a level that reflects Brazil's dire economic scenario. The real has lost 0.7 per cent in 2016, after having plunged 33 per cent last year.

Lisa Gallegos, a spokeswoman for Templeton, said the money manager wasn't available to comment on Brazil.

Mr Hasenstab boosted Brazilian bond ownership from US$2.4 billion at the end of September, making the country's notes his third-biggest holding, data compiled by Bloomberg show. 

In the last three months of 2015, he entered into new positions in real-denominated bonds due Jan 2019 and 2025, both of which had slumped to record lows in September.

Data on any changes to the fund's holdings in 2016 isn't yet publicly available.

Mr Hasenstab is no stranger to contrarian trades. In his 21 years at Franklin Templeton, he's made big bets on assets when they were tumbling. 

In July 2011, he famously snapped up Irish bonds as Europe's debt crisis worsened, making billions on the trade when the country received an international bailout eight months later. 

But Mr Hasenstab's wagers don't always pay off. Just this year, his investment in Mongolian bonds has backfired as political instability roils the nation.

The volatility rocking global financial markets has also hurt Mr Hasenstab's Franklin Templeton Global Bond Fund.

Rocked by redemptions, the fund has lost 7 per cent in 2016, underperforming 95 per cent of its peers. Clients have pulled about US$12 billion from the fund over the past 12 months.

Still, the fund has bested more than 80 per cent of its peers in the past five years, returning an average 1.14 per cent a year over that span.

"Volatility will give you opportunities over a three to five-year period and if you have that long horizon and the research team to dig beyond the surface, that will unfold contrarian opportunities," Mr Hasenstab said in an interview with Bloomberg News in November.

BLOOMBERG

    
 

Swiss banking lobby criticises proposed banking rules

FEB 12, 201611:15 PM

[ZURICH] Switzerland's banking lobby on Friday criticised the country's proposed new "too big to fail"regulation, arguing it gives Swiss financial watchdog FINMA too much discretion in enforcing the new rules.

"This results in the loss of legal and planning certainty for systemically relevant institutions," the Swiss Bankers Association (SBA) said in a statement.

"Furthermore, the SBA emphasizes that the new rules should be developed in a way that is commensurate with international standards, and that in the interests of international competitiveness, these do not extend even further beyond common standards."

In October, Switzerland outlined tough new capital requirements for its two biggest banks, UBS and Credit Suisse, to protect the economy from a major banking collapse.

REUTERS

Dudley eyes risks but says Fed policy easy enough

FEB 12, 201611:29 PM

[NEW YORK] Federal Reserve policy is"appropriately quite accommodative" given the low level of inflation, which poses little threat to a US economic expansion that will only grow older unless there is an outside shock, an influential Fed official said on Friday.

New York Fed President William Dudley, who did not directly address recent market turmoil in prepared remarks, noted that the current US expansion is nearly seven years old and the third longest in the post World War Two period.

But its sheer age does not mean that the risk of recession is "edging higher," he said. "Since the possibility is low that a significant inflation risk would emerge over the near term, this means that the main danger facing the current expansion is the risk of large, adverse shocks." Many investors believe that shock has already arrived as stocks and oil markets have plunged since the beginning of the year on fears of a global economic slowdown that could knock the US economy into recession.

The Fed meanwhile raised rates from near zero in December and may well continue tightening policy gradually if US economic data remains stable, such as a solid rebound last month in retail sales.

Dudley, a close ally of Fed Chair Janet Yellen and a permanent voter on US monetary policy, said key areas of the world's largest economy are in good shape including US housing, while the banking sector is now better capitalized. "Given that the labor market still appears to have some excess slack and inflation is below the Federal Reserve's objective, monetary policy is appropriately still quite accommodative despite the advancing age of the expansion," he said.

Dudley spoke with reporters as the New York Fed released its household debt report, which showed total indebtedness was US$12.12 trillion at the end of the fourth quarter. That was up US$51 billion from the previous quarter, and up US$288 billion from a year earlier.

Some 5.4 per cent of that outstanding debt was delinquent, the lowest rate since mid 2007, according to the report.

REUTERS

    
 

US inventory-to-sales ratio hits highest level since 2009

FEB 12, 201611:18 PM

[WASHINGTON] US business inventories edged up in December as sales fell, pushing the inventory-to-sales ratio to its highest level in 6-1/2 years.

The Commerce Department said on Friday inventories rose 0.1 per cent after a revised 0.1 per cent dip in November. Inventories in November were previously reported to have dropped 0.2 per cent.

Economists polled by Reuters had forecast inventories, which are a key component of gross domestic product, nudging up 0.1 per cent in December.

Retail inventories excluding autos, which go into the calculation of GDP, increased 0.2 per cent in December after gaining 0.3 per cent in November.

The government in its advance GDP report last month estimated that the economy grew at a 0.7 per cent annual rate in the fourth quarter. But weak construction spending, wholesale inventory and factory orders reports already had suggested that fourth-quarter GDP growth could be revised down to an annual rate of about 0.3 per cent.

A record inventory accumulation in the first half of 2015, which outpaced demand, left businesses stuck with unsold merchandise and little incentive to order more goods.

That has contributed to a sharp downturn in manufacturing.

Business sales fell 0.6 per cent in December after declining 0.4 per cent in November. At December's sales pace, it would take 1.39 months for businesses to clear shelves. That was the highest inventory-to-sales ratio since May 2009 and up from 1.38 in November.

The lofty ratio suggests businesses could continue working through the inventory glut through the first quarter, curbing GDP growth.

REUTERS

    
 

UK's Osborne says EU should move toward public tax disclosures

FEB 12, 201611:48 PM

[LONDON] UK Chancellor of the Exchequer George Osborne said the European Union needs to make a push for companies to publish their country-by-country tax bills.

The European Commission last month proposed that tax authorities share such reports, as part of a broader package to crack down on tax dodgers. Osborne said the bloc can go further and the world should follow; he also said current proposals don't do enough to stop companies shuffling their profits between countries to minimize their tax bills, also known as transfer pricing.

"We should be moving to more public country-by-country reporting," Osborne said, during debate with European finance ministers in Brussels Friday. "This is something the UK will seek to promote internationally." The EU wants to make it harder for companies to exploit differences in national laws or park profits in a low-tax jurisdiction instead of paying taxes in the locales where the revenue gets generated. The 28-nation bloc also is tightening oversight of sweetheart tax deals for multinational firms, as reflected by tax probes involving Apple Inc, McDonalds Corp and Starbucks Corp.

EU Economic and Tax Commissioner Pierre Moscovici said the bloc is studying the issue of public disclosure and may move ahead in the future. For now, the Brussels-based commission is concentrating on a slate of measures tied to the Organization for Economic Cooperation and Development's report last year on base erosion and profit shifting, known as BEPS.

"We need to fill all the possible gaps," Moscovici said during the debate, adding that the bloc needs to adapt the OECD principles to make them work under EU law.

German Finance Minister Wolfgang Schaeuble called for the commission's tax plan to be split up so that parts of it could be implemented more quickly. He urged the EU to begin by carrying out the BEPS agreements on their own, "with no deviation," then consider further measures.

"We should not have one package," Schaeuble said. "We will lose time, a lot of time." Broad Support Technical negotiations already are underway, and the European Commission proposals could be adopted in the first half of this year, said Dutch Finance Minister Jeroen Dijsselbloem, whose nation holds the EU's rotating administrative presidency. Dijsselbloem said the Netherlands will lead a "phased-in" approach on Moscovici's proposals.

The EU commission's proposals on administrative cooperation could be agreed on politically as soon as March, Dijsselbloem said. The other half of the EU plan, a more general anti-tax- avoidance directive, will proceed separately, with an aim toward getting a deal by mid-year.

"We will give this high priority," Dijsselbloem told reporters in a press conference after the meeting. He said he'll pursue an "ambitious timetable, which foresees reaching political agreement on both these files before end of our presidency." Other nations generally supported the EU proposals. Spanish Finance Minister Luis de Guindos called for the EU to look more closely at whether to have a coordinated blacklist of tax-haven countries, while Finland's Alexander Stubb said nations need more information on the financial impact of the tax changes.

EU nations must agree unanimously for tax plans to be enacted. The European Parliament plays an advisory role in deliberations and cannot directly participate.

BLOOMBERG

    
 

Risk of Singapore central bank easing seen rising on growth woes

The possibility of Singapore's central bank easing monetary policy at its scheduled policy review in April is rising, analysts say, as weak economic data points to a worsening outlook for growth. 

PHOTO: BLOOMBERG

FEB 12, 20162:43 PM

[SINGAPORE] The possibility of Singapore's central bank easing monetary policy at its scheduled policy review in April is rising, analysts say, as weak economic data points to a worsening outlook for growth.

A batch of indicators released last month showed the city-state's economy ended 2015 on a lacklustre note, adding to worries that global headwinds will keep the trade-dependent economy on a wobbly footing in 2016.

In 2015, exports fell 0.1 per cent, the third straight year of annual decline, while industrial production suffered its biggest year-on-year slump in eight months in December.

"The probability of Singapore slipping into recession...is increasing," said Hak Bin Chua, ASEAN economist for Bank of America Merrill Lynch.

While the baseline scenario is for the Monetary Authority of Singapore (MAS) to keep its exchange-rate based monetary policy unchanged at its semi-annual policy meeting in April, the chances of easing have grown, Mr Chua added.

Against a backdrop of sliding oil prices and uncertainty over the global economy, a number of central banks have eased policy in recent weeks to counter downside risks to growth and inflation.

In Asia, Indonesia's central bank cut interest rates in January to lift its economy, while the Bank of Japan stunned markets by adopting negative interest rates.

To be sure, Singapore is not at immediate risk of a recession, even accounting for the possibility of some downward revision to fourth-quarter gross domestic product.

The city-state's economy bounced back to positive growth in the last two quarters of 2015 after contracting in the April-June quarter.

GDP expanded at an annualised 5.7 per cent in October-December from the previous quarter, as services sector growth helped offset weakness in manufacturing, according to the government's advance estimate. More detailed GDP data is due later this month.

"The big question now is whether services can continue to hold up in the face of a deepening manufacturing recession,"said Mr Chua at Bank of America Merrill Lynch.

In a worrying sign, a recent government survey showed that business sentiment in the services sector has fallen to a four-year low.

Sentiment among manufacturers is at its weakest since 2009 - the year Singapore's economy was hit by the global financial crisis and contracted 0.6 per cent.

Manufacturing weakness means the prospect of a recession in the first half of 2016 is rising, HSBC economist Joseph Incalcaterra said in a recent research note, adding that the trend over the past few years has been for services output to moderate in the first half.

The MAS manages monetary policy by letting the Singapore dollar rise or fall against the currencies of its main trading partners within an undisclosed trading band based on its nominal effective exchange rate (S$NEER).

It now has a policy of 'modest and gradual' appreciation of the S$NEER policy band. One easing option is to flatten the upward slope of the band.

"Our base case is for no change, but there is a high probability of the MAS adopting a flat slope if a recession is on the cards," said HSBC's Mr Incalcaterra.

Singapore's central bank eased monetary policy twice last year, once at an unscheduled policy decision in January 2015.

The MAS is seen as unlikely to opt for another off-cycle policy easing unless China's economy clearly takes a turn for the worse, or oil prices keep sliding.

REUTERS

    
 

Groupon shares go nuts after earnings crush expectations

• Bob Bryan
 
•  

• 17h
• 3,332
 
• 2

Thomson ReutersThe Groupon smartphone app is displayed on a Motorola Droid Bionic cell phone in Denver

Shares of online discount marketplace Groupon are jumping nearly 20% after the company reported stronger than expected earnings.

Groupon crushed estimates, reporting revenue of $917.2 million against expectations for $845.9 million.

Adjusted earnings per share was $0.04 against expectations for a breakeven quarter. 

In response the stock jumped as much as 20% in after hours trading. 

Shares were up about 16% near 4:45 p.m. ET. 

Groupon has had a precipitous fall from grace over the past few years. Since its anticipated IPO in 2012 the stock had fallen 92% as of close Thursday.

After consistent disappointing growth and sliding profits, the company replaced its founder and CEO in November.

"Following a stronger than expected fourth quarter, we enter 2016 with a continued focus on streamlining our global operations, reducing our reliance on low margin products in our shopping business and rekindling our customer acquisition efforts to set the stage for accelerated growth," wrote CEO Rich Williams in the earnings release.

Whether this is a turnaround or a brief comeback remains to be seen.

Google Finance

SEE ALSO: CHAOS ON WALL STREET: Here's what you need to know

NOW WATCH: NASA's Spirit Mars rover found mysterious growths on Mars that could be the biggest discovery in science

More: Groupon Earnings

Carl Icahn and John Paulson just scored a big win

• Julia La Roche
 
•  

• 17h
• 9,493
 
• 1

Brendan McDermid/ReutersCarl Icahn.

See Also

Billionaire Bill Ackman wrote an op-ed in support of Bloomberg for president because 'America is burning'

Here are the hedge funds that are dominating in 2016

KYLE BASS: There's a 'ticking time bomb' in China

Carl Icahn and John Paulson scored a big win on Thursday.

The billionaire investors got seats on the board of insurance giant AIG.

Icahn won't be on the board, but he'll have one of his firm's analysts take the seat. Paulson will have a seat.

Here's Icahn's announcement: 

Today we reached an agreement with AIG whereby one of our analysts will join the board of directors at the upcoming annual meeting in May. I myself declined to go on the board because of my involvement in so many other companies at this time. AIG also entered into a separate agreement with Paulson & Co. Inc. pursuant to which President John Paulson will join the board at the same time. We welcome John Paulson's addition to the board and believe his involvement will be additive, especially in that we both have stated the same goals for AIG. We commend the board for adopting a number of our recommendations over the last few months. We continue to believe that smaller and simpler is better and look forward to working collaboratively with the board and management to help catalyze a turnaround in core P&C operations, a more transparent operating structure, and the ultimate shedding of the SIFI designation. We believe that AIG stockholders will benefit from our agreement, which permits our representative to share information with our principals and consultants, subject to customary confidentiality restrictions. I hope and believe that we will work with AIG’s board to enhance value as we have done with so many other boards and companies in the past.

In October, Icahn sent a public letter to the company's CEO, Peter Hancock, saying that the company continued "to severely underperform" and was "too big to succeed."

AIG nearly failed during the financial crisis and had to be bailed out by the US government. Icahn said the company had not done enough to make itself smaller since then.

In the letter, Icahn said that it was a "no brainer" that splitting up the company would unlock shareholder value. AIG recently rejected Icahn's call to split itself into separate businesses.

Icahn owns 42.2 million shares and Paulson 14.6 million. The stock fell $1.87, or -3.57%, on Friday to end at $50.58 per share.

NOW WATCH: This is what Carl Icahn would do first if he ruled America

More: Hedge Funds Carl Icahn John Paulson AIG 

Jamie Dimon just dropped $26 million on JPMorgan shares

• Matt Turner
 
•  

• 17h
• 243

AP ImagesJamie Dimon.

JPMorgan chief executive Jamie Dimon has bought 500,000 shares in the bank, according to a person familiar with the matter.

The share purchase cost around $26 million, according to the person. The news was first reported by Dow Jones.

Bank stocks have taken a hammering of late, with JPMorgan falling around 20% since 2016 started.

The purchase is likely intended as a sign of confidence in the bank.

JPMorgan's share price jumped 2% in after-hours trading following the report, up to around $54.

Dimon received $27 million in total compensation for 2015. Broken down, it's $1.5 million in salary, $5 million in cash bonus and $20.5 million in performance share units (PSUs),according to an SEC filing.

That works out to a 35% raise from his $20 million compensation for 2014.

NOW WATCH: Here's The Biggest Surprise At The JPMorgan Squash Tournament So Far

More: JPMorgan Jamie Dimon