JPMorgan Beats Expectations

JPMORGAN EARNINGS SURGE 31%  |  JPMorgan Chase reported a 31 percent increase in second-quarter earnings on Friday, helped by strong gains in its investment banking business, its credit card operations and in its mortgage lending division. Net income of $6.5 billion, or $1.60 a share, exceeded analysts’ expectations of $5.47 billion, or $1.44 a share. Revenue was $20 billion, compared with $26 billion in the period a year earlier.

ICAHN’S NEXT MOVE  |  In the battle for Dell, it doesn’t pay to underestimate Carl C. Icahn, Steven M. Davidoff writes in the Deal Professor column. The billionaire investor, in his latest move to challenge the buyout offer of $13.65 a share from Michael S. Dell and the investment firm Silver Lake, is urging fellow shareholders of Dell to start preparing appraisal rights for their shares. This would be a risky process that “can be charitably described as a Hail Mary pass,” Mr. Davidoff writes.

But maybe Mr. Icahn “has another strategy in mind, and this announcement is only one part of it,” Mr. Davidoff says. “To exercise appraisal you have to vote no for the deal, and notify Dell before the vote occurs. By preparing appraisal rights, Mr. Icahn may be making a Hail Mary pass, but one aimed at signaling ‘no’ votes before the actual shareholder vote. Perhaps he is merely trying to show that he has a bigger block of ‘no’ votes than Mr. Dell and Silver Lake think. It’s a small bargaining chip, but at this point everything counts.”

On Friday, Mr. Icahn is expected to sweeten his offer by adding a warrant to allow shareholders to buy additional stock in the future. This would be Mr. Icahn’s fourth attempt to challenge the Dell buyout, Bloomberg News reports.

GRUMBLES FOLLOW A PLAN TO RAISE CAPITAL  |  After the financial crisis, American banks raised more capital than their European counterparts, making them better equipped to lend, Floyd Norris, a columnist for The New York Times, writes. And yet, when United States regulators proposed new rules this week that could force the largest American banks to have a lot more capital in a few years, bank trade groups voiced familiar complaints, Mr. Norris writes.

Mr. Norris continues: “That there are bank capital rules at all stems from the issues a country faces when it provides deposit insurance. Depositors have no reason to care whether the bank is healthy, so a risky bank is not at a competitive disadvantage. The problem gets worse when those who buy bonds issued by banks conclude that their investments are effectively guaranteed by the government.”

ON THE AGENDA  |  Wells Fargo reports earnings this morning. The Thomson Reuters/University of Michigan consumer sentiment index for July is out at 9:55 a.m. Bart Chilton, a Democratic member of the Commodity Futures Trading Commission, is on CNBC at 7:40 a.m. Jamie Dimon, chief of JPMorgan Chase, is on CNBC at 10:15 a.m. Barney Frank, the former congressman from Massachusetts, is on CNBC at 10:35 a.m.

SENATORS INTRODUCE BILL TO SPLIT BIG BANKS  |  “Senator Elizabeth Warren on Thursday introduced an aggressive piece of legislation that intends to take the financial industry back to an era when there was a strict divide between traditional banking and speculative activities,” DealBook’s Peter Eavis writes.

“The bill, which is also sponsored by Senator John McCain, Republican of Arizona, and two other senators, is named the 21st Century Glass-Steagall Act. Its intention is to create a modern version of the seminal Glass-Steagall legislation from the 1930s, which placed firm limits on what regulated banks could do. It was fully repealed in 1999, laying the groundwork for the mergers that created some of the biggest banks of today. If passed, it could force many of those banks to let go of their trading operations.”

Mergers & Acquisitions »

Potential for Deals Drives a Big Surge in the Biotech Sector  |  The rise of personalized medicine has spurred giant pharmaceutical companies to home in on small biotechnology firms.
DealBook »

Invensys Receives Bid From Schneider Electric  |  The British engineering group Invensys said on Thursday that it had received a bid from Schneider Electric of France that valued the company at 3.3 billion pounds, or about $5 billion, The Financial Times reports.
FINANCIAL TIMES

At Sun Valley, Watching to See if the Chatter Is More Than Idle Talk  |  The Allen & Company media and technology conference is best known for the deals that have emerged from hush-hush meetings that take place in the ensuing months.
DealBook »

Telecoms Draw Antitrust Scrutiny in Europe  |  The New York Times reports: “European Union antitrust authorities said on Thursday that they had investigated major telecommunications companies, including Deutsche Telekom of Germany, on suspicion that the companies were using their dominant market positions to limit Internet providers’ access to their networks.”
NEW YORK TIMES

William Morris to Buy Stake in Droga5, an Ad Agency  |  William Morris Endeavor, the giant talent agency, is close to a deal to acquire a 49 percent stake in Droga5, an independent advertising agency based in New York, for roughly $225 million, The New York Times reports.
NEW YORK TIMES

Bumi Chairman Agrees to Buy Out Bakrie Family  |  The proposed $223 million transaction by the chairman, Samin Tan, is the latest twist in a long-running dispute about control of the coal producer. It is opposed by the financier Nathaniel Rothschild.
DealBook »

At Least 3 Bidders in Contention for Boston Globe  |  The rival bids range from $65 million to $80 million, The Boston Globe reports.
BOSTON GLOBE

In Microsoft Overhaul, Signs of Apple  |  Microsoft plans to “dissolve its eight product divisions in favor of four new ones arranged around broader functional themes, a change meant to encourage a tighter marriage among technologies as competitors like Apple and Google outflank it in the mobile and Internet markets,” The New York Times writes.
NEW YORK TIMES

INVESTMENT BANKING »

Swiss Banks Approach a Deal on Tax Evasion  |  The Wall Street Journal reports: “A group of Swiss banks is lining up to deliver key information to U.S. authorities investigating tax evasion, potentially moving a long-running legal battle further toward a close.”
WALL STREET JOURNAL

In Britain, Former Official Speaks Out on Banks  |  “I fear that the banks have bamboozled government into believing that society must choose between safety and growth, between safer banks and bank shareholder value, and between a safer financial framework and a competitive City of London,” Robert Jenkins, a former member of the Bank of England’s financial policy committee, told Bloomberg News.
BLOOMBERG NEWS

Big Payout by Moelis May Whet the Appetite for More  |  Moelis & Company’s $35 million payout to its mainly staff owners shows the partnership model in investment banking can deliver. The snag is that partners will expect a repeat, Dominic Elliott of Reuters Breakingviews writes.
REUTERS BREAKINGVIEWS

Goldman Scoops Up Emerging-Market Bonds  |  The purchases by Goldman Sachs Asset Management have come amid a sell-off, The Wall Street Journal writes.
WALL STREET JOURNAL

PRIVATE EQUITY »

Terreal of France Is Taken Over by Creditors  |  Terreal, a private equity-owned French company that makes tiles and bricks, has been taken over by creditors including Goldman Sachs and Park Square Capital as part of a restructuring deal, The Financial Times reports.
FINANCIAL TIMES

Orix of Japan Has an Appetite for Buyouts  |  The Japanese financial firm Orix plans to spend 50 billion yen ($506 million) on deals in Southeast Asia and the Middle East in the next 12 months, according to Bloomberg News.
BLOOMBERG NEWS

HEDGE FUNDS »

Chief of Highbridge Capital to Step Down  |  Glenn Dubin, who co-founded Highbridge Capital Management more than 20 years ago, is stepping down as chief executive but will remain chairman, The Wall Street Journal reports. The firm is owned by JPMorgan Chase.
WALL STREET JOURNAL

Hedge Fund Analyst Plans a New Firm  |  Sean Grogan, a longtime senior analyst at Conatus Capital Management who left in June, is in the “early stages” of starting his own hedge fund firm, Absolute Return reports.
ABSOLUTE RETURN

I.P.O./OFFERINGS »

A Venture Capitalist Discusses I.P.O.’s  |  Marc Andreessen told CNBC: “The I.P.O. market is deeply broken. It’s become sort of a two-class market. In general the private companies are growing very fast, doing very well, delaying their I.P.O.’s. There are a small number of public companies doing very well in tech, but there are much larger companies that should be public that aren’t.”
CNBC

VENTURE CAPITAL »

Valiant Leads Investment Round in Brazilian Pharmacy Benefits Firm  |  Valiant Capital Management, a San Francisco-based hedge fund, and Aberdare Ventures have jointly acquired a 45 percent stake in a pharmacy benefits company, ePharma, for an estimated 169 million reais ($74.6 million).
DealBook »

LEGAL/REGULATORY »

16 Senators Seek Inquiry of A.T.M.-Style Pay Cards  |  Instead of paper checks or direct deposit, employers are issuing A.T.M.-style cards that can have large fees associated with them.
DealBook »

Jurors to Hear About ‘Fabulous Fab’  |  A federal judge ruled that jurors in the civil trial of Fabrice Tourre, the former Goldman Sachs trader, can hear about an e-mail that references the nickname “Fabulous Fab.”
DealBook »

Geithner Sells House Near Washington  |  The former Treasury secretary Timothy F. Geithner and his wife, Carole, have sold their home in Bethesda, Md., for the $995,000 asking price, The Washington Post reports.
WASHINGTON POST

Elizabeth Duke, Fed Governor, to Step Down  |  Elizabeth A. Duke, a Federal Reserve governor who has helped overhaul the central bank’s approach to financial regulation and has been a consistent supporter of Ben S. Bernanke, said on Thursday that she would step down at the end of August, The New York Times reports.
NEW YORK TIMES

U.S. and China to Discuss Investment Treaty  |  But concerns over cybersecurity have complicated the talks, The New York Times reports.
NEW YORK TIMES