Bank of America reported a first-quarter loss of $276 million on Wednesday, as legal expenses related to the financial crisis mounted, Michael Corkery writes in DealBook. The bank said its litigation expenses increased to $6 billion in the quarter, showing how Bank of America is still paying for its mortgages missteps nearly six years after the financial crisis.
Its quarterly loss of $276 million, or a loss of 5 cents a share, was in sharp contrast with a profit of $1.5 billion, or earnings of 10 cents a share, it posted in the period a year earlier. Analysts polled by Bloomberg News had been expecting earnings per share of 5 cents.
Morgan Stanley and Goldman Sachs are to report first-quarter results on Thursday before the bell.
NEW RULES ON SHORT-TERM BORROWING? Â |Â Janet L. Yellen, chairwoman of the Federal Reserve, suggested some measures on Tuesday that could restrain the use of short-term borrowing at the largest banks, including requiring them to hold more capital, Peter Eavis writes in DealBook. Capital is the financial cornerstone of a bank. A bank with more capital can, in theory, absorb more losses and may be less vulnerable to a bank run.
Banks, particularly those that borrow billions of dollars a day in the short-term debt markets, may oppose the measures out of self-interest, since holding more capital can make it harder for banks to post the sort of returns that their shareholders expect. Bankers may also argue that the Fed is practicing overkill. And though bank lobbyists might note that since the crisis, Wall Street firms make much less use of the so-called repo lending market â€" in which banks lend and borrow money for short periods against financial collateral â€" Ms. Yellen said in her speech that the existing overhaul might not address potential weaknesses in such places.
MOELIS & CO. FIGHTS I.P.O. MARKET CHILL  | When Moelis & Company begins trading on Wednesday, it will be contending with a volatile market that is weighing on initial public offerings. The pricing of its offering at $25 a share â€" below its expected range â€" suggests that not even a strongly performing investment bank can escape the chill in the I.P.O. market, which had flown high until recently, Michael J. de la Merced writes in DealBook. The bank’s I.P.O. will also test whether investors believe it is different than other boutique banks, which shone in 2013 but whose shares have suffered a bit recently.
For the bank’s founder, Kenneth D. Moelis, going public has always been part of the plan. Part of what attracted many bankers to the firm was the lucrative stock compensation packages, giving them shares that they hoped to sell in an I.P.O. someday. And while the offering will give them that long-awaited payday, the bank will remain firmly under the control of Mr. Moelis, who will control the Class B shares of Moelis & Company, giving him roughly 97 percent of the voting power.
A GLIMPSE OF ALIBABA’S GROWTH  | Investors on Tuesday got a sneak peek at the earnings of the Chinese online commerce giant Alibaba Group. What they found may cause some excitement as Alibaba’s long-awaited initial public offering draws closer, Michael J. de la Merced writes in DealBook.
Alibaba had profit of $1.4 billion in its fourth quarter, more than double the amount it made during the period a year earlier. Revenue jumped 66 percent, to nearly $3.1 billion. Such a big jump may help allay concerns that Alibaba’s enormous growth had begun to slow. Those worries began to arise when Alibaba reported only a 51 percent gain in third-quarter revenue compared with figures in the period a year earlier.
The window into Alibaba’s financial results came courtesy of Yahoo, which owns 24 percent of Alibaba and must disclose some of its financial data as part of its own quarterly reports, Vindu Goel writes in The New York Times. But Alibaba will soon provide much more information about its business â€" it plans to file paperwork as early as next week for an initial public offering of stock on an American exchange. For its part, Yahoo said revenue and profit growth were flat for the first-quarter, a slight improvement from previous quarters. Yahoo’s shares soared in after-hours trading, primarily on Alibaba expectations.
ON THE AGENDA  | Housing starts for March are out at 8:30 a.m. The index of industrial production for March is released at 9:15 a.m. The Fed’s regular report on economic activity across the country, known as the beige book, is out at 2 p.m. Janet L. Yellen, chairwoman of the Federal Reserve, delivers remarks at 12:15 p.m. to the Economic Club of New York. Richard W. Fisher, president of the Dallas Fed, gives a speech on the economic outlook at 1:25 p.m. Kenneth D. Moelis, founder and chief executive of Moelis & Company, is on CNBC at 10:15 a.m. and on Bloomberg TV at 10:40 a.m.
QUESTIONING CORPORATE MONITORS  | “In the insider trading case against SAC Capital Advisors, federal prosecutors have given a particularly nice gift to a former federal prosecutor, Bart M. Schwartz,†Steven M. Davidoff writes in the Deal Professor column. Mr. Schwartz, who is now the chairman of the consulting firm Guidepost Solutions, was appointed SAC’s independent compliance consultant as a condition of SAC’s guilty plea to insider trading charges, which was accepted by a federal judge last week.
Mr. Davidoff writes: “The job is likely to earn Mr. Schwartz millions, but it will do little more than that. It’s all part of the corporate monitoring industry, a full employment act for former federal prosecutors that may have little effect on the way any company that is forced to hire a monitor conducts its business.†He adds, “When a corporation accused of wrongdoing agrees to settle the charges or is sentenced to probation, it is often required to pay for a monitor to ensure that it does not break the law again.â€
But it turns out, there may be problems. One of the main criticisms of these compliance programs is that they perpetuate an “old boys’ network,†rewarding former federal prosecutors with a job that pays millions of dollars. The work of these monitors is also secretive. Mr. Davidoff writes, “Without seeing the monitors’ work, it’s hard not to think that this is all just part of one of the biggest growth industries around â€" the corporate investigation industry. It’s a nice profit center for former prosecutors, but it may not be much more.â€
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Citic Group Seeks $36.5 Billion in Hong Kong Listing  | The cash-and-stock deal calls for the Citic Group to sell almost all of its operating assets to its Hong Kong-listed unit, Citic Pacific. DealBook »
Metso Board Rejects Merger Approach by Scottish Rival  | The Finnish engineering company Metso, which provides services for the mining, construction and energy sectors, said its board had decided a proposal by the Weir Group was not in the interest of shareholders. DealBook »
Diageo Makes New Bid for Controlling Stake in United Spirits of India  | Diageo, the world’s largest distiller, offered to pay about $1.9 billion for an additional 26 percent stake in United Spirits of India, after an unsuccessful bid to take a controlling stake last year. DealBook »
Twitter Acquires Gnip, Bringing a Valuable Data Service in House  | Twitter announced on Tuesday that it had acquired Gnip, a company that provides data about activity on the social network as it is occurring, the Bits blog writes. The eight-year-old company is the latest data company to be acquired by Twitter. NEW YORK TIMES BITS
Facebook Requires Users to Install Separate Messaging App  | Facebook is removing messaging from its smartphone app, requiring users to install a separate app â€" a move the company says will improve user experience, the Bits blog writes. The new Messenger app will also include features that are in competing messaging apps, including WhatsApp, which Facebook recently agreed to buy for more than $16 billion. NEW YORK TIMES BITS
Game of Drones  | It just might be the right time for a “Top Gun†sequel, considering we are already on the highway to the danger zone, Maureen Dowd writes in a New York Times Op-Ed column. “Instead of unmanned planes controlled by terrorists, the drones could be an army of angry birds amassed by our computer overlords, Google, Facebook and Amazon,†she writes. NEW YORK TIMES
Washington Post Editorial Backs Comcast-Time Warner Cable Deal  | “The government’s smartest move is not to block the merger, but to make clear that regulators will respond if big industry players begin to violate basic principles of market fairness,†according to an editorial in The Washington Post. WASHINGTON POST
Credit Suisse Profit Falls 34% in First Quarter  | The bank reported quarterly earnings of 859 million Swiss francs, or about $976 million, compared with profit of 1.3 billion francs in the year-earlier period. DealBook »
European Parliament Approves Laws on Banking Overhaul  | The move put in place the final pieces of a landmark plan for managing a banking system whose troubles have dented the bloc’s economic prospects, The New York Times reports. NEW YORK TIMES
Barclays Picks Former Bain & Co. Executive to Lead Compensation Committee  | The addition of Crawford Gillies to the board of directors comes after Barclays increased its bonus pool for last year despite a steep loss in the fourth quarter. DealBook »
As Credit Dries Up, Smaller Companies in China Feel the Pinch  | Exorbitant interest rates and a scarcity of loans have turned financing into a challenge for those without the political connections to borrow at regulated rates, The New York Times writes. NEW YORK TIMES
Intel’s Profit Slips, but Investors Are Still Turning Toward Tech’s Staid Stalwarts  | While tech’s Internet darlings have stumbled, a number of older tech giants, like Hewlett-Packard, Microsoft and Oracle, have so far this year outperformed market averages, The New York Times writes. NEW YORK TIMES
German Firm Sells Heat Exchanger Operations to Funds Advised by Triton  | The GEA Group said the deal valued the unit at about $1.8 billion and was part of its strategy to focus on supplying systems to the food industry. DealBook »
Symantec Draws Buyers and Activists  | The sudden firing last month of Steve Bennett, Symantec’s chief executive, is said to be luring private equity firms and activist investors to the company, which makes security software, Reuters reports, citing unidentified people familiar with the situation. A number of private equity firms, including Bain Capital, the Blackstone Group and the Carlyle Group, have begun considering the possibility of a leveraged buyout of all or parts of Symantec, the people said. REUTERS
CVC Capital’s Auto Racing Gamble Pays Off  | The private equity firm CVC Capital has made $8.2 billion from its investment in Formula One auto racing, Forbes reports, citing new research. The firm bought F1 for $2 billion in 2006 in a leveraged buyout financed with two loans. FORBES
Elliott Holds Firm With $21 a Share Bid for Riverbed  | The activist hedge fund Elliott Management said on Tuesday that it was keeping its takeover bid for Riverbed Technology at $21 a share, or $3.3 billion, noting that its offer remained well above where Riverbed’s stock is trading. DealBook »
R.B.C. to Turn Trading Desk Into Hedge Fund  | The Royal Bank of Canada is said to be planning to spin off its global arbitrage and trading arm, based in New York, into a stand-alone hedge fund as soon as the end of this year, The Wall Street Journal reports, citing unidentified people familiar with the situation. WALL STREET JOURNAL
Hacker Discusses Plans for Hedge Fund  | Weev, the 29-year-old hacker also known as Andrew Auernheimer who was released from federal prison last weekend, said he was planning to start a new hedge fund called TRO LLC, TechCrunch writes. TECHCRUNCH
New Crop of I.P.O.’s Getting Back to Basics  | A fresh crop of eager initial public offerings this week may encounter a more rational market as investors now seem to want companies they can understand, Robert Cyran writes in Reuters Breakingviews. DealBook »
SoftBank Shares Rise on Alibaba Profit Report  | Shares in SoftBank rose as much as 8 percent after Alibaba, which is 37 percent owned by SoftBank, reported $1.4 billion in profit for the October to December quarter. DealBook »
Associated Materials Withdraws I.P.O. Â |Â Associated Materials, a maker of homebuilding products, said on Tuesday that it had decided to withdraw its plans for an initial public offering, Reuters reports. The company, owned by the private equity firm Hellman & Friedman, filed last July for an I.P.O. of up to $100 million. REUTERS
I.P.O. of China’s WH Group Involves 29 Banks  | “The spread of the company’s operations may have resulted in a myriad of banking relationships, but certainly not any divisional coherence,†The Financial Times writes in the Lex blog. FINANCIAL TIMES LEX
Squarespace Raises $40 Million From General Atlantic  | Squarespace, an all-in-one website and e-commerce service provider, said on Tuesday that it had raised $40 million from the private equity firm General Atlantic. That brings the start-up’s fund-raising total to nearly $80 million. DealBook »
Automattic Said to Be Seeking More Than $100 Million  | Automattic, which runs the blogging platform WordPress, is said to be raising between $100 million and $150 million in new venture capital funding round, Fortune reports, citing unidentified people familiar with the situation. The round will value the company at more than $1 billion. FORTUNE
Anti-Tech’s New Nativism  | “In the past, it was racists and homophobes who attacked newcomers to San Francisco. Today, anti-tech activists are promoting a new nativism, charging incoming tech workers with undermining the city’s traditional values,†Randy Shaw writes in BeyondChron, San Francisco’s alternative online daily. BEYONDCHRON
Pension Deal Edges Detroit a Step Closer to Recovery  | In its rush to exit bankruptcy, the city reached an agreement that would prevent cuts to pensions of retired police officers and firefighters, The New York Times reports. NEW YORK TIMES
3 Former ICAP Brokers Appear in British Court in Libor Manipulation Case  | At a brief hearing in Westminster Magistrates’ Court, the former brokers Danny Martin Wilkinson, Darrell Paul Read and Colin John Goodman spoke only to confirm their identities. DealBook »
Not All Investigations Are Alike  | Not all criminal investigations of a company are alike, and there are telltale signs about how serious a threat one may present, writes Peter J. Henning in the White Collar Watch column. DealBook »
Brazil’s Star, Petrobras, Is Hobbled by Scandal and Stagnation  | Petrobras has recently come to symbolize disarray in Brazil’s sluggish economy and the reassessment of growth prospects in emerging markets, The New York Times writes. NEW YORK TIMES
Troubled Italian Bank May Seek Larger Share Sale  | Monte dei Paschi will try to raise €5 billion instead of the expected €3 billion, Italian news reports said, sending shares lower, The New York Times writes. NEW YORK TIMES
