JPMorgan Directors Feel Heat in a Vote

As JPMorgan Chase’s annual meeting nears, much of the tension surrounds a critical vote to split the chairman and chief executive roles â€" a decision that could strip Jamie Dimon, the bank’s influential leader, of the dual titles he has held since 2006. Behind the scenes, though, another battle is brewing.

Some JPMorgan shareholders are taking public aim at individual directors who hold crucial positions on the bank’s audit and risk committees as the bank grapples with an onslaught of regulatory challenges.

On Friday, the CtW Investment Group, which represents union pension funds and owns six million shares in JPMorgan, said it planned to vote against the three directors on the risk policy committee and the head of the audit committee. While it is not known how other shareholders are voting on directors, big stakeholders like BlackRock, T. Rowe Price and TIAA-CREF have increasingly taken aim at boards, voting against directors they think are performing poorly.

JPMorgan, once the darling of Washington after emerging from the financial crisis in far better shape than its rivals, suffered a multibillion-dollar trading loss last year. Since then it has increasingly found itself under regulatory scrutiny for potential risk and compliance lapses.

The Office of the Comptroller of the Currency, one of the bank’s chief regulators, is deciding whether to bring new enforcement actions, according to people who spoke on the condition of anonymity. One action the agency is considering, these people said, focuses on whether JPMorgan used faulty documents in lawsuits to collect overdue credit card debt.

In one of the latest regulatory crackdowns, investigators from the Federal Energy Regulatory Commission sent a scathing message to the bank in March that warned of a potential action over accusations of manipulation in the energy markets. The confidential government document, reviewed by The New York Times, also took aim at a top executive, Blythe Masters, contending she gave “false and misleading statements” under oath.

“We intend to vigorously defend the firm and the employees in this matter,” said Kristin Lemkau, a spokeswoman for the bank, which is the nation’s largest. “We strongly dispute that Blythe Masters or any employee lied or acted inappropriately in this matter.”

While Mr. Dimon apologized in a recent letter to shareholders for disappointing “our regulators,” vowing to bolster controls and “do all the work necessary to complete needed improvements,” some shareholders are not satisfied and are now considering how to cast their votes. Some shareholders are reluctant to vote to split the role of chairman and chief executive, saying the right way to send a message is to vote against certain directors, a move they think will result in positive change at the board level.

JPMorgan’s annual meeting is on May 21 in Tampa, Fla., and the results of shareholders’ votes on all the proposals will be announced then. Directors and senior executives at the firm have been contacting major shareholders in recent weeks, hoping to ease any concerns they might have. They hope to persuade investors not only to back the board but also to vote against a proposal calling for the separation of the chairman and chief executive role. Last year, 40 percent of shareholders supported the proposal.

Shareholders like CtW are singling out members of the risk committee because they think the board failed to police the bank in important areas, contributing to the trading loss in 2012.

“What we have learned over the past year is that the performance of the risk committee is even worse than we thought,” said Richard Clayton, CtW’s research director. “Their behavior is a combination of being out at sea and asleep at the wheel. Both are bad and together they are disastrous.”

James S. Crown, who has been a director of JPMorgan or one of its predecessor companies since 1991, is chairman of the risk policy committee. The other members are David M. Cote, the head of Honeywell International; Timothy P. Flynn, a former KPMG executive; and Ellen V. Futter, president of the American Museum of Natural History. Mr. Flynn was appointed to the risk policy committee in August 2012.

CtW also plans to vote against Laban P. Jackson, chairman of the audit committee, which shares responsibility for oversight.

CtW voted against all four directors last year but went public only about its displeasure with Ms. Futter, contending she lacked banking experience. Last year, 86 percent of shareholders voted for Ms. Futter, the lowest amount of support for any director. A person close to JPMorgan who spoke on the condition of anonymity because he was not authorized to discuss board matters publicly, said that while Ms. Futter was not a career banker, she was well steeped in issues like reputational risk, bringing value to the committee.

Failing to receive a majority of shareholder votes does not necessitate a resignation, but such a vote might prompt a director to leave.

In 2011, before the big trading loss, CtW met with senior bank executives, warning that risk controls needed to be improved. It felt its concerns fell on deaf ears.

At a recent meeting with bank management, including the chief financial officer, Marianne Lake, and the general counsel, Stephen M. Cutler, the company owned up to its recent risk lapses, CtW said, but it has failed to devise any significant changes to improve the risk committee’s operations.

“We realize there was a management failure,” said Dieter Waizenegger, CtW’s executive director. “But it is as if the board didn’t do anything wrong and that is puzzling.”

Ms. Lemkau, the bank spokeswoman, said, “We disagree with CtW on the points they have raised but continue to engage with them.”

CtW’s six million shares are worth about $285 million. In contrast, the company’s biggest shareholders own more than 100 million JPMorgan shares each.

Since the trading loss last year, JPMorgan and its board have worked to fortify controls. JPMorgan’s board reduced Mr. Dimon’s pay this year by more than 50 percent, to $11.5 million, and issued a public report on the trading misstep. With the approval of the board, JPMorgan also clawed back more than $100 million in pay from the employees at the center of the soured wagers.

Last year, the board met 15 times, according to documents filed with the Securities and Exchange Commission. In the bank’s proxy filing, the 11-member board said that Mr. Dimon should continue to hold the duel top posts.

“The board has determined that the most effective leadership model for the firm currently is that Mr. Dimon serves as both,” the filing said.

After Bankruptcy, a Leaner Kodak Faces an Uphill Battle

When Eastman Kodak emerges from bankruptcy this summer or fall, it will be a shadow of the blue-chip corporate giant it once was.

A celebrated company whose little yellow packages of film documented generations of birthday parties, weddings and anniversaries, the new Kodak will be more commercially focused, providing printing and imaging services to businesses as well as film to the movie industry.

Consumers will probably still be able to find Kodak-brand film in vacation spots around the world. They will still be able to buy digital cameras bearing the Kodak name. And they will still be able to download and print their digital pictures at kiosks in their local drugstores.

But those businesses will no longer be owned or controlled by Kodak. As part of the more than yearlong bankruptcy process, they were sold to others.

Antonio M. Perez, Kodak’s oft-criticized chief executive, who has been trying to stage a turnaround of the company since 2005 and has overseen it through bankruptcy proceedings, said in a news release this week that the company had a “clear path forward” and was positioned for a “profitable and sustainable future.”

But some skeptics sounded warnings about Kodak’s outlook, noting that certain commercial businesses that the company is banking on are fiercely competitive and that Kodak’s own projections show steep declines in growth in other business lines.

The steady decline and evolution of Kodak’s business has been felt most strongly in Rochester, where the predecessor for the company was founded by George Eastman in 1881.

A classic, all-American company town whose landscape is dotted with the legacy of Mr. Eastman and Kodak, Rochester and some of its residents admit that the days of Kodak as a corporate giant were well behind it.

“I cannot remember a case that I’ve ever been associated with in any way where so many people wanted the company to succeed but so few people thought it actually could,” said John C. Ninfo II, a retired United States bankruptcy judge whose grandfather worked at Kodak and whose great uncle tended the gardens at the Eastman house. “For some, the bankruptcy proceeding has been a sorrowful thing, like losing a family member.”

But critics of the company also said its unwillingness â€" seemingly even in the throes of bankruptcy â€" to acknowledge that many of its products had fallen out of favor and become almost quaint in an increasingly digitized world was its ultimate downfall.

“The company made a big mistake of riding the cash cow â€" film â€" to the point that there was simply no more milk coming from it,” said George T. Conboy, the chairman of Brighton Securities, a stock brokerage and financial services firm in Rochester.In the bankruptcy process over the last year, many of Kodak’s most recognizable businesses were either transferred or sold.

Early last year, it announced plans to stop making digital cameras, pocket video cameras and digital picture frames. Kodak recently entered an agreement to license its name for digital cameras to another company. It sold part of its online photo publishing service to the Internet publishing firm Shutterfly for $23.8 million.

But the bankruptcy process hit a major snag last year when the company struggled to sell what it considered to be a crown jewel â€" a package of 1,100 digital imaging patents.

Kodak had hoped the patents could go for as much as $2.6 billion. But a consortium of buyers that included some of the world’s largest technology companies, like Apple, Google and Facebook, bought the patents in December for far less, about $527 million. The firms have not said how they plan to incorporate or use the Kodak technology, and many of the patents are for processes and methods that consumers often cannot see. That money was used to repay a big chunk of a loan that Kodak had obtained shortly after filing for bankruptcy in early 2012.

“What that situation signified â€" which was part of the problem with the whole business model â€" is that they thought their technology and their patents were more valuable than they really were,” said Jay T. Westbrook, a professor at the University of Texas Law School. “They clung to that right until the end.”

Another big hurdle in the bankruptcy proceedings was cleared this week when Kodak said it would spin off two businesses to the Kodak Pension Plan in Britain for $650 million in cash and debt as part of a deal that would absolve Kodak of $2.8 billion of claims the pension had made against the company. The agreement still needs the approval of the bankruptcy court.

The two segments that were sold include document imaging and the business that made Kodak a household name, its camera film and photographic paper lines, along with the kiosks found in Target and Walgreens stores where consumers can download and print pictures.

Officials with the British pension fund, which retained the right to use the Kodak brand, have indicated that they intend to hire a management team to run the business. A spokesman for Steven Ross, chairman of the fund, could not reach Mr. Ross for a requested interview.

The film business is in a decline, but observers said the deal was probably the best alternative for the pension fund.

“They can either run the business and throw off cash every year to pay the pensioners,” Professor Westbrook said. “Or they can keep the business for a year or two or five years and maybe something will happen that will make it look better and sell it then.”

As for Kodak’s new focus on the commercial side of the business, analysts worry that future growth and profits could prove difficult there as well.

For instance, in a presentation Kodak provided this year to its creditors in the bankruptcy court, Kodak showed a sharp 34 percent decline in growth through 2017 in the segment that includes the entertainment imaging and commercial films business.

Another business Kodak is banking on for its future is its commercial printing and packaging business, which creates packaging labels for companies, like the plastic labels found on a bottle of juice. Analysts describe that as a highly fragmented and competitive industry and say that Kodak’s share of the market is fairly small.

In an e-mailed response to questions, a Kodak spokesman said that the company “has a compelling and unique combination of advantages to lead this industry.”

But some observers see an uphill battle.

“This is a company that is going from being a behemoth that owned the market to a niche player scrapping for share,” Mr. Conboy said. “It will be a different game for the new Eastman Kodak.”

Mario Gabelli, the $750 Million Man

Mario J. Gabelli is more likely to be listed among the United States’ best-known money managers than among its highest-paid chief executives. But that is not because he does not qualify for both lists. He does.

Indeed, Mr. Gabelli belongs on a short list of chief executives of public companies who have raked in more than $750 million in total compensation. That’s right: more than three-quarters of a billion dollars.

But there will probably not be any uproar from the shareholders of Gamco Investors at the company’s annual meeting next week at a yacht club in Greenwich, Conn. One reason is that Mr. Gabelli controls Gamco, an investment firm based in Rye, N.Y., because he owns almost all of its Class B shares.

On Thursday, the company announced a plan to share some of its success with those less fortunate by pledging to donate 25 cents a share to charities designated by each shareholder. Gamco said the contributions could exceed $5 million â€" no small sum, unless you compare it with how much Mr. Gabelli has been making.

Last year alone, he was paid almost $69 million as the chairman and chief executive of Gamco. But that was not his best year. He took home almost $71 million in 2007. And in 2002, he received a $50 million payout that increased the amount he collected that year to $87.7 million.

All told, since he took his company public in early 1999, Mr. Gabelli has been paid nearly $777 million, an average of $55.5 million a year.

Most years, a few other chief executives have reaped more than Mr. Gabelli, but even fewer, if any, have received so much, year in and year out, for so long.

His recipe for riches has been a compensation arrangement that resembles that of a hedge fund manager. He collects no base salary or bonus but takes 10 percent of the company’s pretax profits as well as fees for attracting investors and managing funds.

The company declined to discuss Mr. Gabelli’s compensation.

Now 70, Mr. Gabelli has not indicated that he is contemplating an exit strategy, though the shareholders will decide next week whether to consider reclassifying his shares. The proposal in the proxy statement suggests each of his 19.5 million shares might be converted into 1.25 shares of Class A stock, giving him close to 80 percent of all the outstanding shares and making it easier for him to pare his holdings.

At the current share price of about $50, his stake is worth more than $1 billion.

Fed Governor Pushes for Measure Aimed at Strengthening Large Banks

A prominent financial regulator on Friday advocated for new measures aimed at strengthening large Wall Street firms, a move that could add momentum to the growing number of calls to reduce the risks posed by big banks.

In a speech, Daniel K. Tarullo, a Federal Reserve governor, said that some of the debt markets that Wall Street institutions borrow in remain vulnerable, even after the overhauls instituted after the financial crisis of 2008.

To make the system safer, Mr. Tarullo floated an idea that could affect banks that make heavy use of these so-called wholesale markets. His idea is to require such banks to hold extra capital, a part of a bank’s balance sheet that can serve as a buffer against losses.

“We would do the American public a fundamental disservice were we to declare victory without tackling the structural weaknesses of short-term wholesale funding markets, both in general and as they affect the too-big-to-fail problem,” Mr. Tarullo said during a speech at the Peterson Institute for International Economics.

Mr. Tarullo’s speech, which called for other changes to toughen regulation, comes in the wake of a bill introduced last week that took aim at large banks. The legislation, from Senator Sherrod Brown, a Democrat from Ohio, and Senator David Vitter, a Republican from Louisiana, would subject the biggest banks to much higher capital requirements than smaller banks. If the bill is passed, many large banks would probably choose to shed assets to shrink to a size where they would not be required to hold higher amounts of capital.

The bill has already generated fierce objections from the financial industry. Its critics said the capital increases would force banks to cut back on their lending, and they argued that large banks provide unique benefits to the economy.

Political analysts have said that the Brown-Vitter bill has little chance of passing, but the measure has reignited a conversation about what to do about banks whose failure could weaken the broader financial system.

Mr. Tarullo’s speech indicates that senior regulators are also dissatisfied with the status quo. They are devising ways to improve on the two main overhauls that came after the crisis, which are the Dodd-Frank Act, passed by Congress in 2010, and the internationally agreed bank regulations known as Basel III.

Regulators like the Federal Reserve don’t have to wait for Congress to pass legislation to introduce new measures. The Dodd-Frank act gave regulators substantial freedom to come up with measures to strengthen the system on their own. Mr. Tarullo mentioned that leeway in this speech on Friday. Dodd-Frank “gives the Federal Reserve the authority, and the obligation, to apply regulations of increasing stringency to large banking organizations in order to mitigate risks to financial stability,” he said.

The wholesale debt markets are a concern to Mr. Tarullo because they were particularly susceptible to panic in the 2008 crisis. The Fed’s biggest bailout loans went to shoring up these markets. Firms like Goldman Sachs and JPMorgan Chase borrow heavily in these markets and use the borrowed money to purchase assets.

In times of stress, wholesale debt markets can dry up and a vicious wave of selling can ensue, causing asset prices to plunge. To mitigate that risk, banks now have to hold more liquid assets.

But Mr. Tarullo thinks more could be done. “Relatively little has been done to change the structure of wholesale funding markets so as to make them less susceptible to damaging runs,” he said in the speech.

Mr. Tarullo sees heightened risk when a very large bank uses a lot of wholesale financing. It would appear to make a too-big-to-fail bank more unstable and thus more of a threat to the system than if it used more stable sources of borrowing like long-term bonds and federally insured deposits.

The more wholesale financing a bank uses, the more capital it would have to hold, taking into account its reserves of liquid assets, according to Mr. Tarullo’s approach. If this idea becomes a fleshed-out official policy, the Fed could in theory implement it under the special powers it gained from Dodd-Frank.

If such a rule appears, it sounds as if Mr. Tarullo would want it to have teeth.

“To provide a meaningful counterweight to the risks associated with wholesale funding runs, the additional capital requirement would have to be material,” he said.

Scrutiny Falls on a Pioneer at JPMorgan

It started with a summer internship in London in 1987, when Blythe Masters first encountered derivatives. In the years since, she rose through the ranks at JPMorgan Chase to become one of the most powerful executives on Wall Street.

But today, Ms. Masters, 44, faces a possible regulatory crackdown. The enforcement staff of the Federal Energy Regulatory Commission, which oversees the nation’s energy markets, has found that Ms. Masters gave “false and misleading statements” under oath about her awareness of problematic activities by a group of energy traders in Houston, The New York Times reported on Friday.

If the regulator proceeds with an action based on the findings, it could fine JPMorgan and Ms. Masters, the article said. A spokesman for the bank, Kristin Lemkau, said: “We strongly dispute that Blythe Masters or any employee lied or acted inappropriately in this matter.”

Ms. Masters, the head of JPMorgan’s commodities business, is known as a pioneer in the use of credit derivatives, financial products that played a starring role in the 2008 financial crisis. Her success at JPMorgan stemmed from her vision in the 1990s that these products could transform the banking industry.

Growing up in Kent, England, Ms. Masters was fond of horseback riding and “displayed a stubborn, driven streak,” according to “Fool’s Gold,” a 2009 book by Gillian Tett of The Financial Times. She went on to study economics at Cambridge University.

Rather than take vacation, Ms. Masters spent her summers working in JPMorgan’s London office, according to the book. She joined the commodities desk after graduating in 1991, and eventually moved to New York.

Some colleagues expected Ms. Masters to leave the bank when she became pregnant at 23, the book says. But that wasn’t her personality. When she went to the hospital to have her baby, Ms. Masters brought along a device to track market prices.

She became a managing director at 28, then the youngest woman in the bank’s history to reach that rank.

Derivatives seemed “creative” and also appealed to Ms. Masters because of her quantitative background, she once said. By separating certain risks from an underlying asset, derivatives seemed to offer a way for a bank to make more loans than it otherwise would be able to.

These products were being developed at rival firms. At JPMorgan, Ms. Masters was determined to apply them on a large scale.

She made a breakthrough when Exxon, a longtime client, asked for a credit line, according to “Fool’s Gold.” To offload the risk without actually selling the loan, Ms. Masters arranged a deal with the European Bank for Reconstruction and Development in London, in which the bank would get fees in exchange for assuming the risk of default.

The deal was known as a credit default swap.

Soon, the team at JPMorgan began talking to regulators about the new product. In 1996, the Federal Reserve essentially gave its blessing with a statement suggesting that banks could use credit derivatives to reduce their capital reserves.

But the grand promise of derivatives came undone in the financial crisis. The contracts ended up making embattled institutions even more vulnerable to mounting losses.

Warren E. Buffett called derivatives “financial weapons of mass destruction.” And that made Ms. Masters a “destroyer of worlds,” a September 2008 article in The Guardian declared.

“Unfortunately, tools that transfer risk can also increase systemic risk if major counterparties fail to manage their own risk exposures properly,” Ms. Masters said in a speech that year before the Securities Industry and Financial Markets Association.

But she added, “It is important to distinguish between tools and their users. It is also important to distinguish between disfunctionality in a product per se and disfunctionality in the underlying to which it is applied.”

Since the crisis, Ms. Masters worked on reviving JPMorgan’s commodities business, a division she was credited with building. “I will not give up on you and your vision,” James E. Staley, a longtime JPMorgan executive, wrote to Ms. Masters in 2010, according to an article in The Wall Street Journal. (Mr. Staley left the bank this year.)

Ms. Masters has had various senior roles at JPMorgan, serving as the chief financial officer of the investment bank from 2004 to 2007. She became head of commodities after that, and last year was given additional regulatory responsibilities.

In an interview with PBS in 2009, Ms. Masters looked back on her pioneering work.

“It was amazing feeling to be able to be involved in invention â€" but not just invention, the creating of a marketplace that had real value to add,” she said. “The irony is that credit became too loose.”

I.S.S. Backs Elliott in Fight Over Hess’ Board

An influential adviser to shareholders sided with Elliott Management in the fight over Hess Corporation‘s board, recommending that investors support the hedge fund’s slate of five directors.

In a report published late on Thursday, Institutional Shareholder Services backed virtually every argument that Elliott has made for its director nominees since beginning its fight earlier this year.

Much of Hess’ board has presided over significant erosion of the oil driller’s share price, and even a recent shake-up of the directors indicated that the company knew it needed change.

“It is hard to avoid the conclusion that the sweeping changes to this class of management nominees in March, a month after the proxy contest was announced, were not a de facto admission that the existing board would not withstand much scrutiny from shareholders given a real choice of nominees,” I.S.S. analysts wrote in their report.

The recommendation â€" coupled with the backing from another proxy advisory firm, Glass Lewis â€" marks a significant victory for Elliott in its campaign. The hedge fund, which owns a 4.5 percent stake, has proposed weighing a number of significant changes at Hess, including a potential break-up of the driller.

At the heart of the hedge fund’s campaign is the belief that Hess has been undisciplined in its operational focus and profligate in its spending.

I.S.S. wrote in its report that Hess appears to have consistently lagged its peers in terms of stock appreciation, having delivered a total shareholder return of 1.7 percent over the three years before Elliott began its campaign. That’s compared with a 46.6 percent average for the driller’s peers and 46.2 percent for the Standard & Poor’s 500-stock index.

For its part, Hess has argued that a plan it instituted in 2010 is finally bearing fruit, even as it replaced a number of incumbent directors with new names. But I.S.S. questioned that argument, as well as the decision to overhaul the slate of board nominees up for election this year.

“The question is never whether an incumbent board, having presided over a long destruction of value, has suddenly awakened to the need for change,” the proxy firm wrote. “It is whether, when the heightened scrutiny of the proxy contest ends, the same board is likely to remain as reinvigorated as it now professes to be.”

Unsurprisingly, Elliott was elated by the I.S.S. report. “We appreciate I.S.S.’ support and recognize that I.S.S. rarely endorses a full slate of nominees,” John Pike, a senior portfolio manager at the hedge fund, said in a statement. “This conclusion further underscores the issues at Hess and the need for change.”

For its part, Hess lambasted the report as “flawed and shoddy analysis” and the latest supporting activist investors over a company. The driller added that a smaller proxy adviser, Egan Jones, backed its slate of nominees in full.

“ISS has betrayed its own principles,” Hess said in a statement. “It is troubling that ISS would suggest that shareholders support dissident candidates who are beholden to a new, four percent shareholder that has offered no constructive ideas for change at Hess.”

Hess’ shareholder meeting is currently scheduled for May 16.

Glencore Shares Rise on Investor Optimism on Cost Savings

LONDON - Shares in Glencore Xstrata rose on its first day of trading on Friday, as investors banked on potential dividends and future cost savings from one of the largest deals in recent years.

After more than a year in the making, the commodities trader Glencore International has finally completed its $30 billion all-share takeover of the mining giant Xstrata.

On its first day of trading on Friday, the newly combined company’s stock price rose more than 4 percent ahead of an investor presentation by Glencore Xstrata’s new chief executive, Ivan Glasenberg. The firm’s shares also will start trading in Hong Kong on Monday. The company has a market valuation of almost $70 billion.

Mr. Glasenberg, the former head of Glencore, outmuscled his counterpart at Xstrata, Mick Davis, for the top job at the newly merged company following a shareholder revolt over the initial takeover bid.

After Qatar Holding, which owns a 12 percent stake in Xstrata, balked at Glencore’s original 2.8-share proposal, the commodities trader raised its offer to 3.05 of its own shares for each Xstrata share.

In response, Glencore also demanded that Mr. Glasenberg become chief executive earlier than had previously been envisioned.

Attention will now shift to how the combined company will streamline its operations and pare back on new investment because of falls in the global commodity markets.

Some analysts also have speculated the Glencore Xstrata may pursue further acquisitions to take advantage of depressed valuations of rivals.

Deutsche Bank, Goldman Sachs, JPMorgan Chase and Nomura Bank advised Xstrata on the deal, while Citigroup and Morgan Stanley advised Glencore. Lazard advised Qatar Holding.

Glencore Shares Rise on Investor Optimism on Cost Savings

LONDON - Shares in Glencore Xstrata rose on its first day of trading on Friday, as investors banked on potential dividends and future cost savings from one of the largest deals in recent years.

After more than a year in the making, the commodities trader Glencore International has finally completed its $30 billion all-share takeover of the mining giant Xstrata.

On its first day of trading on Friday, the newly combined company’s stock price rose more than 4 percent ahead of an investor presentation by Glencore Xstrata’s new chief executive, Ivan Glasenberg. The firm’s shares also will start trading in Hong Kong on Monday. The company has a market valuation of almost $70 billion.

Mr. Glasenberg, the former head of Glencore, outmuscled his counterpart at Xstrata, Mick Davis, for the top job at the newly merged company following a shareholder revolt over the initial takeover bid.

After Qatar Holding, which owns a 12 percent stake in Xstrata, balked at Glencore’s original 2.8-share proposal, the commodities trader raised its offer to 3.05 of its own shares for each Xstrata share.

In response, Glencore also demanded that Mr. Glasenberg become chief executive earlier than had previously been envisioned.

Attention will now shift to how the combined company will streamline its operations and pare back on new investment because of falls in the global commodity markets.

Some analysts also have speculated the Glencore Xstrata may pursue further acquisitions to take advantage of depressed valuations of rivals.

Deutsche Bank, Goldman Sachs, JPMorgan Chase and Nomura Bank advised Xstrata on the deal, while Citigroup and Morgan Stanley advised Glencore. Lazard advised Qatar Holding.

JPMorgan Runs Afoul of Energy Authorities

JPMORGAN RUNS AFOUL OF ENERGY AUTHORITIES  |  Government investigators contend that JPMorgan Chase devised “manipulative schemes” that turned “money-losing power plants into powerful profit centers,” and that a senior executive of the bank gave “false and misleading statements” under oath â€" findings that appear in a confidential government document that was sent to the bank in March, Jessica Silver-Greenberg and Ben Protess report in DealBook. The document warned of a potential crackdown by the Federal Energy Regulatory Commission, the regulator of the nation’s energy markets.

In addition, the bank faces showdowns with other agencies, like the Office of the Comptroller of the Currency, which is considering new enforcement actions against JPMorgan over how it collected credit card debt and its possible failure to alert authorities to suspicions about Bernard L. Madoff, people who were not authorized to discuss the cases publicly said. “In a meeting last month at the bank’s Park Avenue headquarters, the comptroller’s office delivered an unusually stark message to Jamie Dimon, the chief executive and chairman: the nation’s biggest bank was quickly losing credibility in Washington. The bank’s top lawyers, including Stephen M. Cutler, the general counsel, have also cautioned executives about the bank’s regulatory problems, employees say,” according to DealBook. “For executives, the bank’s transition from model citizen to problem child in the eyes of the government has been jarring.”

In the energy market investigation, a 70-page document took aim at Blythe Masters, a top executive who is known on Wall Street for helping expand the boundaries of finance. The document cites her supposed “knowledge and approval of schemes” carried out by energy traders in Houston. The investigators claimed she had “falsely” denied under oath her awareness of the problems. “We intend to vigorously defend the firm and the employees in this matter,” said Kristin Lemkau, a spokeswoman for the bank. “We strongly dispute that Blythe Masters or any employee lied or acted inappropriately in this matter.”

BUFFETT’S BEAR  |  Douglas A. Kass, the head of Seabreeze Partners Management, was handpicked by Warren E. Buffett to add some spice to Berkshire Hathaway’s annual meeting this weekend. “It’s fair to say that I’m Daniel in the lion’s den,” said Mr. Kass, who, as Berkshire’s first credentialed bear, is betting that the stock will fall. “But I’ve prepared intensely.” DealBook’s Michael J. de la Merced writes that Mr. Buffett “has tried to toughen up the questioning at the annual meeting, a 180-degree turn from what the majority of publicly traded companies seek to do. He has asked reporters, including one from The New York Times, and analysts to ask tougher questions. Inviting Mr. Kass, 64, is perhaps the boldest move yet.” As of Thursday, Mr. Kass was winnowing 25 potential questions down to six.

Mr. Buffett, who is likely to reiterate at the meeting that his company has a succession plan in place, and will also most likely discuss his desire to strike more big deals, is making a bold foray into the latest technology. He fired up a new Twitter account on Thursday and quickly attracted many thousands of followers, including Mr. Kass. The service had at least one feature going for it, Mr. Buffett said. “The co-founder came from Nebraska,” he said, in an apparent reference to Evan Williams. “So it can’t all be bad.”

SAC BEEFS UP COMPLIANCE  |  Steven A. Cohen, facing a criminal investigation into questionable trading at his hedge fund SAC Capital Advisors, sought on Thursday to convince investors and regulators that he takes compliance seriously. In a letter to investors, Mr. Cohen announced a broad set of changes including clawing back the pay of employees who violate the law, DealBook’s Peter Lattman reports. “These reforms send an unmistakable message: We have zero tolerance for wrongdoing and if you are caught breaking the rules, it will cost you,” Mr. Cohen wrote in the letter. “This problem is our problem to solve. It’s my name on the door and we will solve it.”

Mr. Cohen’s investors must soon decide whether to withdraw their money. Last week, the firm extended a May 15 deadline for withdrawals by three months.

ON THE AGENDA  |  The unemployment report for April is out at 8:30 a.m. Berkshire Hathaway is expected to report earnings. Mr. Buffett is on Bloomberg TV at 8 a.m. Mary Jo White, the new leader of the Securities and Exchange Commission, speaks at a meeting of the Investment Company Institute in Washington at 8 a.m.

APPLE’S MOVE KEEPS TAX BILL LOW  |  Apple, which borrowed $17 billion this week in the largest corporate bond offering ever, “has been a pioneer in tactics to avoid paying taxes to Uncle Sam,” Floyd Norris, a columnist for The New York Times, writes. Distributing some of its cash pile to shareholders would force Apple to pay taxes. “So it borrows instead to buy back shares and increase its stock dividend.” Mr. Norris continues: “The borrowings were at incredibly low interest rates, as low as 0.51 percent for three-year notes and topping out at 3.88 percent for 30-year bonds. And those interest payments will be tax-deductible. Isn’t that nice of the government? Borrow money to avoid paying taxes, and reduce your tax bill even further.”

Mergers & Acquisitions »

Verizon Chief Said to Talk Tough on a Deal With Vodafone  |  A JPMorgan analyst, Philip Cusick, said the chief executive of Verizon Communications had said he did not think Verizon would need to pay a premium to buy Vodafone’s 45 percent stake in Verizon Wireless, Reuters reports.
REUTERS

BC Partners Offers $1.3 Billion for Animal Identification Company  |  The European private equity firm BC Partners has offered $1.3 billion to buy the electronic animal identification company Allflex from its private equity owners Electra Partners.
DealBook »

OfficeMax Investor Seeks to Block Office Depot Deal  |  A shareholder of OfficeMax sued the company’s directors on Thursday in an effort to prevent the acquisition by Office Depot, Reuters reports.
REUTERS

Glencore Completes Deal for Xstrata  |  Glencore International, the Swiss commodities trader, announced on Thursday that its merger with the mining giant Xstrata was complete and that shares in the newly combined company, called Glencore Xstrata, will start trading in London on Friday.
DealBook »

With Deal Done, Glencore Chief Rolls Up His Sleeves  |  The number of layoffs at the combined Glencore-Xstrata is “going to be big,” Ivan Glasenberg, the chief executive, told The Wall Street Journal.
WALL STREET JOURNAL

Instagram Deal Is Looking Better and Better  |  The acquisition of Instagram by Facebook a year ago was risky, and Instagram is still not profitable. But the potential payout is increasing, Robert Cyran of Reuters Breakingviews writes.
REUTERS BREAKINGVIEWS

INVESTMENT BANKING »

R.B.S. Prepares to Sell Shares as Profit Surges  |  The Royal Bank of Scotland has signaled that it is moving closer to privatization as it reported its first quarterly profit since 2011.
DEALBOOK

BNP Paribas First Quarter Profit Falls 45%  |  The decrease in earnings at the biggest French bank was slightly better than analysts expected and was partly due to one-off charges.
DealBook »

Advice for Dimon, as Shareholders Vote  |  JPMorgan Chase shareholders are voting whether to recommend that Jamie Dimon, the chief executive, be stripped of his chairman role. “Dimon could end this needless drama in one stroke: Hand the chairman post to someone else,” Jonathan Weil writes in Bloomberg View.
BLOOMBERG VIEW

Buffett Supports Dual Role for Dimon  | 
BLOOMBERG NEWS

Perelman Pledges $100 Million to Columbia Business School  |  Ronald Perelman, a billionaire and longtime deal maker, has pledged $100 million to Columbia Business School, the university announced on Thursday.
DealBook »

Why a UBS Split Would Not Be the Best Move  |  The chief executive of the Swiss banking giant UBS, writes Dominic Elliott of Reuters Breakingviews, should see Knight Vinke’s intervention as a warning â€" stick with the program and don’t stop cutting risk.
REUTERS BREAKINGVIEWS

Lazard Hires Slaughter, a Former JPMorgan Deal Maker  |  Lazard said on Thursday that it had hired Larry Slaughter, who was most recently a co-head of North American investment banking for JPMorgan Chase, as a vice chairman for investment banking.
DealBook »

PRIVATE EQUITY »

Private Equity Giants Attract Less Money to Invest  |  The Financial Times reports: “The 50 largest private equity groups raised less capital over the past five years as the industry struggled to attract and retain investors, according to a study of the 300 biggest companies.”
FINANCIAL TIMES

HEDGE FUNDS »

Man Group Faces Further Client Outflows  |  Clients continued to withdraw money from the Man Group, as the world’s largest publicly traded hedge fund announced plans to buy back almost $500 million of its own debt.
DealBook »

For Hedge Funds, Japan’s Monetary Policy Is a Boon  | 
FINANCIAL TIMES

I.P.O./OFFERINGS »

Shares of ING’s U.S. Unit Rise 7% in Debut  |  Shares of the American arm of the Dutch financial services firm ING Group edged up in their trading debut on Thursday.
DealBook »

Yelp Shares Rise on Report of Improving Revenue  |  Yelp’s stock reached an all-time high, climbing as high as 27 percent on Thursday to $32.14, The Wall Street Journal notes.
WALL STREET JOURNAL

Ares Management Said to Talk to Banks About I.P.O.  | 
REUTERS

Colony American Homes Files to Go Public  | 
BLOOMBERG NEWS

VENTURE CAPITAL »

Twitter Hires Morgan Stanley Banker  |  Twitter hired Cynthia Gaylor, a managing director at Morgan Stanley, to be its head of corporate development.
DealBook »

Venture Capital’s Rocky Road for Entrepreneurs  |  New data point to higher failure rates among start-ups that take venture capital and even fewer chances for the founders of companies to earn anything in an exit, Steven M. Davidoff writes in the Deal Professor column.
DealBook »

New Venture Firm Opens in New York  |  The firm, Bowery Capital, plans to invest in business-oriented start-ups with a marketing or technology focus. It is led by Mike Brown Jr., who previously co-founded AOL Ventures.
DealBook »

LEGAL/REGULATORY »

Hedge Fund Trader Is Sentenced to 4.5 Years in Insider Case  |  Todd Newman, a onetime hedge fund trader at Diamondback Capital who was convicted of insider trading, was sentenced as part of the government’s widespread crackdown.
DealBook »

Senior S.E.C. Officials Depart  |  The Securities and Exchange Commission announced on Thursday that Carlo V. di Florio, head of the agency’s Office of Compliance Inspections and Examinations, and David P. Bergers, the interim No. 2 enforcement official, will step down.
DealBook »

Shaky Agreements Over Corporate Tax System  |  Despite widespread support for fixing the corporate tax system, “the campaign for an overhaul is exposing deep fault lines within the business world that suggest it may fall apart,” The New York Times writes.
NEW YORK TIMES

European Central Bank Hints at Limits  |  The central bank, which cut its benchmark interest rate to a record low on Thursday, also indicated that its promise to do “whatever it takes” to save the euro had limits, The New York Times writes.
NEW YORK TIMES

Proposed European Tax on Financial Transactions Is Criticized by Lobbying Group  |  The tax would fall disproportionately on London firms, the London Chamber of Commerce and Industry, a business lobbying group, said in a report published Thursday.
NEW YORK TIMES

A Tobin Tax, Bankruptcy Style  |  Starting this month, there is a $25 fee to file a notice that a debtor claim in a Chapter 11 case has been sold, Stephen J. Lubben writes in the In Debt column.
DealBook »

British Activists Press Tax Case Involving Goldman Sachs  |  An activist group asked a court to review a deal struck in 2010 between Goldman Sachs and British tax authorities that allowed the firm to avoid as much as $31 million in interest on unpaid taxes.
DealBook »

Auto Lenders Come Under Scrutiny  |  The Wall Street Journal reports: “The Consumer Financial Protection Bureau has issued subpoenas to U.S. auto lenders over the sale of extended warranties and other financial products, according to people familiar with the investigation.”
WALL STREET JOURNAL

BC Partners Offers $1.3 Billion for Animal Identification Company

Electra Partners today announces it has received a binding offer for Allflex Holdings (“Allflex”), the world’s leading manufacturer and distributor of plastic and electronic animal identification tags, from funds advised by BC Partners.

The offer is subject to consultation with the relevant works council in France and certain regulatory approvals. If the offer is accepted, and reflecting current exchange rates, acceptance of the offer will generate gross proceeds of US$630.5 million to clients of Electra Partners. This includes Electra Private Equity PLC who will receive US$398 million (£256.7 million) on closing, representing a gross return of 15x original cost (including income) over the 14 years of investment; an IRR of 28%.

Electra Partners and Allflex were advised by Rothschild.

Electra Partners first invested in Allflex in 1998 investing US$46 million in the US$160 million buyout of the company. The business has since been refinanced a number of times such that total cumulative proceeds receivable by Electra Partners’ clients after completion of this transaction will amount to US$835 million.

Over the 14 years of Electra Partners’ ownership, Allflex has seen strong organic and acquisitive growth driven by increased focus on food chain traceability and mandatory regulations controlling the spread of animal diseases. To capitalise on increasing demand, Allflex introduced new products, extended tagging to more species, and expanded into new geographical markets such as China and Africa.

David Symondson, Deputy Managing Partner at Electra Partners, said:

“Allflex is an excellent business which has proved to be a first-class investment for Electra Partners delivering strong returns at each of the refinancings over the years and now at the sale. Over this time, the company has become the leading global provider of animal identification tags with an expanded product range which includes RFID and tissue sampling tags.

“As with the sale of Capital Safety Group, which we sold last year for a 6.5x multiple, Allflex is another proven example of Electra Partners creating substantial value for clients by transforming international businesses into truly global leaders in their fields.”

David Symondson and Rhian Davies were responsible for the investment in Allflex.

Electra Private Equity PLC has already issued a statement in relation to the impact of the sale of its interest in Allflex.

The sale follows a busy start to 2013 for Electra Partners in which it has anounced the realisation of its investment in esure, which generated a 3x return, and three new investments: UBM Data Services (now called AXIO Data Group), a portfolio of secondary private equity funds, and CALA group.

Electra Partners refers to Electra Partners LLP acting on behalf of Electra Private Equity PLC and other clients.

Ends

For further information please contact:

For David Symondson:
Charlotte McMullen, M:Communications    +44 (0)20 7920 2349
Andrew Kenny or Nicholas Board, Electra Partners    +44 (0)20 7306 3932
Laurent Haziza, Rothschild    +44 (0)20 7280 5230

Note to Editors:

About Electra Partners LLP
Electra Partners is an independent private equity fund manager with over 30 years’ experience in the mid-market buyout sector. As at 30 September 2012, the firm had funds under management of over £1.3 billion. The firm's flexible investment approach allows it to invest across a broad range of sectors and financial instruments including equity, senior equity, convertibles and mezzanine debt. Concentrating principally on Western Europe, and with the majority of investments expected to be made in the United Kingdom, Electra Partners typically seeks to invest in the region of £40 to £120 million of equity, in deals f up to £300 million enterprise value.

The firm's major client is Electra Private Equity PLC, a private equity investment trust which has been listed on the London Stock Exchange since 1976.

For further information please visit www.electrapartners.com.

Electra Partners LLP is authorised and regulated by the Financial Conduct Authority.

Man Group Faces Further Client Outflows

LONDON - Clients continued to withdraw money from Man Group in the first quarter, as the world’s largest publicly-traded hedge fund announced plans on Friday to buy back almost $500 million of its own debt.

The firm, based in London, has struggled with weak performance during the financial crisis, while outflows from the firm’s investment funds have put pressure on its top management.

Emmanuel Roman, who became chief executive this year, said strong performance in the global equity markets during the first quarter had helped to lift returns for some of the firm’s funds, while a weakening in the bond markets had somewhat hindered their performance.

Man Group investors withdrew $3.7 billion during the first three months of the year, according to a company statement. The firm’s total fund under management fell almost 4 percent, to $54.8 billion, over the same time period.

“This was a disappointing quarter from a flows perspective,” Mr. Roman said in a statement. “Investment performance is the lifeblood of our business and in time we expect good performance to translate into flows.”

The bond buyback plan, announced Friday, will save around $78 million in interest payments, Man Group said.

Changes last month in how Man Group’s capital position was calculated freed up $550 million of extra capital, some of which the firm will use to repurchase the bonds.

The bond buyback program is part of Mr. Roman’s efforts to boost the firm’s stock price, which has fallen around 60 percent over the last two years. He joined the firm in 2010 after it acquired a rival hedge fund, GLG Partners. Before moving to the top job, Mr. Roman was Man Group’s chief operating officer.

Man Group’s share price rose 9.1 percent in early morning trading in London on Friday.

Earlier this year, the hedge fund imposed a bonus cap for top executives, saying that annual cash bonuses would be no more than 250 percent of individuals’ salaries.

Man Group Faces Further Client Outflows

LONDON - Clients continued to withdraw money from Man Group in the first quarter, as the world’s largest publicly-traded hedge fund announced plans on Friday to buy back almost $500 million of its own debt.

The firm, based in London, has struggled with weak performance during the financial crisis, while outflows from the firm’s investment funds have put pressure on its top management.

Emmanuel Roman, who became chief executive this year, said strong performance in the global equity markets during the first quarter had helped to lift returns for some of the firm’s funds, while a weakening in the bond markets had somewhat hindered their performance.

Man Group investors withdrew $3.7 billion during the first three months of the year, according to a company statement. The firm’s total fund under management fell almost 4 percent, to $54.8 billion, over the same time period.

“This was a disappointing quarter from a flows perspective,” Mr. Roman said in a statement. “Investment performance is the lifeblood of our business and in time we expect good performance to translate into flows.”

The bond buyback plan, announced Friday, will save around $78 million in interest payments, Man Group said.

Changes last month in how Man Group’s capital position was calculated freed up $550 million of extra capital, some of which the firm will use to repurchase the bonds.

The bond buyback program is part of Mr. Roman’s efforts to boost the firm’s stock price, which has fallen around 60 percent over the last two years. He joined the firm in 2010 after it acquired a rival hedge fund, GLG Partners. Before moving to the top job, Mr. Roman was Man Group’s chief operating officer.

Man Group’s share price rose 9.1 percent in early morning trading in London on Friday.

Earlier this year, the hedge fund imposed a bonus cap for top executives, saying that annual cash bonuses would be no more than 250 percent of individuals’ salaries.

Man Group Faces Further Client Outflows

LONDON - Clients continued to withdraw money from Man Group in the first quarter, as the world’s largest publicly-traded hedge fund announced plans on Friday to buy back almost $500 million of its own debt.

The firm, based in London, has struggled with weak performance during the financial crisis, while outflows from the firm’s investment funds have put pressure on its top management.

Emmanuel Roman, who became chief executive this year, said strong performance in the global equity markets during the first quarter had helped to lift returns for some of the firm’s funds, while a weakening in the bond markets had somewhat hindered their performance.

Man Group investors withdrew $3.7 billion during the first three months of the year, according to a company statement. The firm’s total fund under management fell almost 4 percent, to $54.8 billion, over the same time period.

“This was a disappointing quarter from a flows perspective,” Mr. Roman said in a statement. “Investment performance is the lifeblood of our business and in time we expect good performance to translate into flows.”

The bond buyback plan, announced Friday, will save around $78 million in interest payments, Man Group said.

Changes last month in how Man Group’s capital position was calculated freed up $550 million of extra capital, some of which the firm will use to repurchase the bonds.

The bond buyback program is part of Mr. Roman’s efforts to boost the firm’s stock price, which has fallen around 60 percent over the last two years. He joined the firm in 2010 after it acquired a rival hedge fund, GLG Partners. Before moving to the top job, Mr. Roman was Man Group’s chief operating officer.

Man Group’s share price rose 9.1 percent in early morning trading in London on Friday.

Earlier this year, the hedge fund imposed a bonus cap for top executives, saying that annual cash bonuses would be no more than 250 percent of individuals’ salaries.

Man Group Faces Further Client Outflows

LONDON - Clients continued to withdraw money from Man Group in the first quarter, as the world’s largest publicly-traded hedge fund announced plans on Friday to buy back almost $500 million of its own debt.

The firm, based in London, has struggled with weak performance during the financial crisis, while outflows from the firm’s investment funds have put pressure on its top management.

Emmanuel Roman, who became chief executive this year, said strong performance in the global equity markets during the first quarter had helped to lift returns for some of the firm’s funds, while a weakening in the bond markets had somewhat hindered their performance.

Man Group investors withdrew $3.7 billion during the first three months of the year, according to a company statement. The firm’s total fund under management fell almost 4 percent, to $54.8 billion, over the same time period.

“This was a disappointing quarter from a flows perspective,” Mr. Roman said in a statement. “Investment performance is the lifeblood of our business and in time we expect good performance to translate into flows.”

The bond buyback plan, announced Friday, will save around $78 million in interest payments, Man Group said.

Changes last month in how Man Group’s capital position was calculated freed up $550 million of extra capital, some of which the firm will use to repurchase the bonds.

The bond buyback program is part of Mr. Roman’s efforts to boost the firm’s stock price, which has fallen around 60 percent over the last two years. He joined the firm in 2010 after it acquired a rival hedge fund, GLG Partners. Before moving to the top job, Mr. Roman was Man Group’s chief operating officer.

Man Group’s share price rose 9.1 percent in early morning trading in London on Friday.

Earlier this year, the hedge fund imposed a bonus cap for top executives, saying that annual cash bonuses would be no more than 250 percent of individuals’ salaries.

RBS Prepares to Sell Shares as Net Profit Surges

LONDON - Royal Bank of Scotland signaled that it was moving closer to privatization on Friday as the bank reported its first quarterly profit since 2011.

The bank, which is 81 percent owned by the British taxpayer after receiving a multi-billion dollar bailout during the financial crisis, said net profit in the three months through March 31 was £393 million ($611 million), compared to a £1.5 billion loss in the same period last year, beating analysts’ estimates. The firm benefited from a £249 million one-off gain on the value of its own debt.

Since 2008, R.B.S. has been slashing assets, reducing costs and trimming its exposure to risky trading activity in a bid to boost its profitability, and return taxpayer funds.

The firm, based in Edinburgh, plans to sell a stake in Citizens Financial Group, the American lender it bought in 1988, while it also has announced the listing of part of its British branch network and has sold shares its local insurance unit, Direct Line.

The bank’s top executives said on Friday that the restructuring would be mostly complete by next year, which would allow the British government to start reducing its holding in R.B.S.

“What we want to do is have a business that’s performing well for its customers so we can write a prospectus with the government enabling the government to start selling shares from the middle of 2014,” RBS’s chairman, Phillip Hampton, said. “It could be earlier, that’s a matter for the government.”

The bank’s chief executive, Stephen Hester, told reporters on Friday that he had not held recent discussions with United Kingdom Financial Investments, the government entity created in 2008 to recover taxpayers’ investments in both R.B.S. and Lloyds Banking Group which had to be bailed out during the financial crisis.

The R.B.S. head added that the initial price of the shares may below what the British government paid for them in 2008, but added that he expected the average share price to be above the government’s 407 pence-a-share break even point.

“Because of the size of the state shareholding in R.B.S. and Lloyds, selling these shares will take a number of years,” Mr. Hester said on Friday. “The average sale price will likely be in excess of what was paid.”

Shares in R.B.S. fell 3.6 percent, to 297 pence, in early morning trading in London on Friday.

As part of its restructuring, the British bank said that it had continued to reduce its investment banking division in the first quarter of the year, while also setting aside fewer funds to cover delinquent loans.

After an international expansion before the financial crisis, R.B.S. is refocusing its efforts on retail and commercial banking, which now generates the lion’s share of the firm’s quarterly pretax earnings.

“The core franchise value of one of the dominant U.K. retail and wholesale banks is coming to the fore,” Sanford Bernstein analysts said in a research note to investors on Friday.

The bank’s chief, however, warned that the sluggish British economy still weighed on earnings, and that the firm’s restructuring was not yet complete.

“We are running hard to stand still,” said Mr. Hester. “There’s no momentum in the profits until the economy recovers.”

RBS Prepares to Sell Shares as Net Profit Surges

LONDON - Royal Bank of Scotland signaled that it was moving closer to privatization on Friday as the bank reported its first quarterly profit since 2011.

The bank, which is 81 percent owned by the British taxpayer after receiving a multi-billion dollar bailout during the financial crisis, said net profit in the three months through March 31 was £393 million ($611 million), compared to a £1.5 billion loss in the same period last year, beating analysts’ estimates. The firm benefited from a £249 million one-off gain on the value of its own debt.

Since 2008, R.B.S. has been slashing assets, reducing costs and trimming its exposure to risky trading activity in a bid to boost its profitability, and return taxpayer funds.

The firm, based in Edinburgh, plans to sell a stake in Citizens Financial Group, the American lender it bought in 1988, while it also has announced the listing of part of its British branch network and has sold shares its local insurance unit, Direct Line.

The bank’s top executives said on Friday that the restructuring would be mostly complete by next year, which would allow the British government to start reducing its holding in R.B.S.

“What we want to do is have a business that’s performing well for its customers so we can write a prospectus with the government enabling the government to start selling shares from the middle of 2014,” RBS’s chairman, Phillip Hampton, said. “It could be earlier, that’s a matter for the government.”

The bank’s chief executive, Stephen Hester, told reporters on Friday that he had not held recent discussions with United Kingdom Financial Investments, the government entity created in 2008 to recover taxpayers’ investments in both R.B.S. and Lloyds Banking Group which had to be bailed out during the financial crisis.

The R.B.S. head added that the initial price of the shares may below what the British government paid for them in 2008, but added that he expected the average share price to be above the government’s 407 pence-a-share break even point.

“Because of the size of the state shareholding in R.B.S. and Lloyds, selling these shares will take a number of years,” Mr. Hester said on Friday. “The average sale price will likely be in excess of what was paid.”

Shares in R.B.S. fell 3.6 percent, to 297 pence, in early morning trading in London on Friday.

As part of its restructuring, the British bank said that it had continued to reduce its investment banking division in the first quarter of the year, while also setting aside fewer funds to cover delinquent loans.

After an international expansion before the financial crisis, R.B.S. is refocusing its efforts on retail and commercial banking, which now generates the lion’s share of the firm’s quarterly pretax earnings.

“The core franchise value of one of the dominant U.K. retail and wholesale banks is coming to the fore,” Sanford Bernstein analysts said in a research note to investors on Friday.

The bank’s chief, however, warned that the sluggish British economy still weighed on earnings, and that the firm’s restructuring was not yet complete.

“We are running hard to stand still,” said Mr. Hester. “There’s no momentum in the profits until the economy recovers.”

RBS Prepares to Sell Shares as Net Profit Surges

LONDON - Royal Bank of Scotland signaled that it was moving closer to privatization on Friday as the bank reported its first quarterly profit since 2011.

The bank, which is 81 percent owned by the British taxpayer after receiving a multi-billion dollar bailout during the financial crisis, said net profit in the three months through March 31 was £393 million ($611 million), compared to a £1.5 billion loss in the same period last year, beating analysts’ estimates. The firm benefited from a £249 million one-off gain on the value of its own debt.

Since 2008, R.B.S. has been slashing assets, reducing costs and trimming its exposure to risky trading activity in a bid to boost its profitability, and return taxpayer funds.

The firm, based in Edinburgh, plans to sell a stake in Citizens Financial Group, the American lender it bought in 1988, while it also has announced the listing of part of its British branch network and has sold shares its local insurance unit, Direct Line.

The bank’s top executives said on Friday that the restructuring would be mostly complete by next year, which would allow the British government to start reducing its holding in R.B.S.

“What we want to do is have a business that’s performing well for its customers so we can write a prospectus with the government enabling the government to start selling shares from the middle of 2014,” RBS’s chairman, Phillip Hampton, said. “It could be earlier, that’s a matter for the government.”

The bank’s chief executive, Stephen Hester, told reporters on Friday that he had not held recent discussions with United Kingdom Financial Investments, the government entity created in 2008 to recover taxpayers’ investments in both R.B.S. and Lloyds Banking Group which had to be bailed out during the financial crisis.

The R.B.S. head added that the initial price of the shares may below what the British government paid for them in 2008, but added that he expected the average share price to be above the government’s 407 pence-a-share break even point.

“Because of the size of the state shareholding in R.B.S. and Lloyds, selling these shares will take a number of years,” Mr. Hester said on Friday. “The average sale price will likely be in excess of what was paid.”

Shares in R.B.S. fell 3.6 percent, to 297 pence, in early morning trading in London on Friday.

As part of its restructuring, the British bank said that it had continued to reduce its investment banking division in the first quarter of the year, while also setting aside fewer funds to cover delinquent loans.

After an international expansion before the financial crisis, R.B.S. is refocusing its efforts on retail and commercial banking, which now generates the lion’s share of the firm’s quarterly pretax earnings.

“The core franchise value of one of the dominant U.K. retail and wholesale banks is coming to the fore,” Sanford Bernstein analysts said in a research note to investors on Friday.

The bank’s chief, however, warned that the sluggish British economy still weighed on earnings, and that the firm’s restructuring was not yet complete.

“We are running hard to stand still,” said Mr. Hester. “There’s no momentum in the profits until the economy recovers.”

Quarterly Profit at BNP Paribas Falls 45%

Paris - BNP Paribas, France’s largest bank, said Thursday that first-quarter profit fell from a year earlier, but it still managed to beat market expectations.

Net income for the January-March period came in at 1.6 billion euros, or $2.1 billion, down 45 percent from the same three months a year earlier, BNP Paribas said in a statement. That was slightly better than the 1.5 billion euros analysts surveyed by Reuters had expected.

Jean-Laurent Bonnafé, the bank’s chief executive, said in a video statement that results were weaker because the European financial crisis weighed on demand for credit, even as loans were made at low interest rates. Deposits continued to grow “significantly” in all the bank’s markets, particularly in Italy, he said.

BNP Paribas noted that the year-earlier results included a one-time gain of 1.8 billion euros on the sale of a stake in its Klépierre unit, which made the most recent quarter look weaker in comparison. It said that a better reflection of its performance could be seen in the fact that pretax profit at its operating divisions fell just 8.1 percent.

The bank, based in Paris, also reported first quarter revenue of 10.1 billion euros, up 1.7 percent from a year earlier. Revenue was affected by two one-off items of note, including a 215 million euro write-down on the bank’s own debt and a gain of 364 million euros as a result of its adoption of new accounting rules.

Mr. Bonnafé noted the bank had attained “a very strong solvency and liquidity positions,” with a Basel 2.5 common equity Tier 1 ratio of 11.7 percent, and a “fully loaded” Basel 3 common equity Tier 1 ratio of 10 percent. Such measures of regulatory capital provide an indication of an institution’s ability to bear financial shocks.

BNP Paribas described the period as a “transitional quarter” for its corporate and investment banking business, which saw revenue slide 21.1 percent from a year earlier to 2.5 billion euros, and pretax income tumble more than 30 percent to 806 million euros.

The investment banking unit’s advisory and capital markets revenue fell 25 percent to 1.7 billion. Revenue in the fixed income sector fell 27 percent to 1.3 billion. The equities and advisory business posted a 20 percent decline in revenue, to 395 million euros.

BNP Paribas, which recorded 155 million euros in restructuring costs in the quarter, said “many projects” to improve and streamline its operations are now getting under way, including early retirement programs at its BNPP Fortis unit in Belgium and BNL unit in Italy.