BANKS’ LITIGATION RESERVES KEPT SECRET  | Bracing for a barrage of legal settlements for their roles in mortgage practices leading up to the financial crisis, banks have been setting aside cash to fund impending payouts. But while understanding the size of these funds, called litigation reserves, is necessary for weighing the banks’ financial strength, many banks are continuing to keep this figure secret, Peter Eavis writes in DealBook.
Though banking experts do not suspect banks of keeping inadequate funds, many in the industry are surprised that these figures have not been made public. For one, regulators have pressed banks in the past to reveal the troubled areas of their business like disclosing their holdings of risky European government bonds. Moreover, the banks’ reluctance to divulge their litigation reserves contrasts their willingness to report their reserves for bad loans.
Mr. Eavis writes: “If investors or government authorities suing the banks know how much banks have set aside, bank executives assert, they will be emboldened to increase their demands. And since bank shareholders effectively are liable for legal payouts, they should support management’s desire to keep the size of the litigation reserve secret.â€
MORGAN STANLEY TO REPORT EARNINGS Â |Â Morgan Stanley reports fourth-quarter earnings at 7:15 a.m. today.
GOLDMAN’S PROFIT â€" AND COMPENSATION COSTS â€" FALL  | Goldman Sachs on Thursday reported net income for the fourth quarter of $2.33 billion, or $4.60 a share, down 19 percent from the same period a year earlier. Net revenue was $8.78 billion. The bank suffered from a decline in its fixed income business, though showed strength in its equity underwriting business, Rachel Abrams writes in DealBook.
Goldman reported the value set aside for compensation and benefits in 2013 was at its lowest since 2009, William Alden writes in DealBook. The bank, which is known for doling out hefty bonuses, is paying out $12.61 billion in compensation and benefits for the year, a 3 percent decrease from last year’s figure.
Citigroup also reported earnings on Thursday that failed to live up to Wall Street expectations, driven by a decline in fixed income trading revenue and a slow-down in mortgage refinancing. The bank reported quarterly net income of $2.7 billion, or 85 cents a share, and revenue of $17.8 billion, Michael Corkery reports in DealBook. But numbers were adjusted downward after accounting for adjustments and one-time items, to $2.6 billion in net income, or 82 cents a share.
BlackRock, the world’s largest asset managers, was the bright spot of the day, reporting fourth-quarter earnings of $841 million, or $4.86 a share, from $690 million, or $3.93 a share, in the period a year earlier, exceeding estimates, Nathaniel Popper writes in DealBook.
JUDGE REJECTS DETROIT’S PLAN TO PAY OFF BANKS  | Judge Steven W. Rhodes of United States Bankruptcy Court on Thursday rejected a deal Detroit had negotiated to free itself from long-term financial contracts by paying $165 million to Bank of America and UBS, Mary Williams Walsh writes in DealBook. Detroit had planned to use the cash that is currently tied up in the financial contracts, known as interest-rate swaps, to pledge as collateral against new debt.
Though Judge Rhodes rejected one of Detroit’s plans, he approved another, giving the city the go-ahead to borrow $120 million from Barclays, which the city said it desperately needs to provide municipal services in bankruptcy. But it is unclear whether Barclays would make the loan without resolution of the swaps issue.
ON THE AGENDA  | December housing starts figures come out at 8:30 a.m. The Reuters/University of Michigan’s consumer sentiment index for January is released at 9:55 a.m. Jeffrey M. Lacker, the president of the Richmond Fed, discusses the economic outlook at 12:30 p.m. Morgan Stanley, General Electric, and Bank of New York Mellon report fourth-quarter earnings before the bell. China Mobile starts selling iPhones.
SACRAMENTO KINGS WELCOME BITCOIN  | The Sacramento Kings, a team in the National Basketball Association’s Western Conference, said on Thursday it will start accepting Bitcoin on March 1, becoming the first professional sports team to adopt the virtual currency. The team said it will allow fans to use Bitcoin for purchasing tickets and apparel in the team’s online store, ReCode reports.
The move will allow fans to make purchases “without physically reaching into their wallets,†Vivek Ranadivé, the team’s majority owner, said in a statement. The team is also trying out Google Glass, ESPN writes.
FIVE OSCAR NOMINATIONS FOR ‘WOLF’  | The “Wolf of Wall Street†collected five Academy Award nominations on Thursday, including for best picture.
GOLDMAN SACHS MAKES LIST OF TOP 100 EMPLOYERS  | Forbes released its annual “100 Best Companies to Work For†list on Thursday, with Google taking first place for the fifth time. Goldman Sachs is the first large American bank on the list, coming in at No. 45. But there is still hope for those in the financial industry â€" financial services companies, mortgage lenders and accounting firms all had at least one representative on the list.
Â
Ranking the Biggest Restaurant Leveraged Buyouts  | Apollo’s $1.3 billion takeover of the parent of Chuck E. Cheese’s ranks among the top five leveraged buyouts of an American restaurant chain.
DealBook »
DealBook »
Carlos Slim Avoids Prompting Takeover  | Carlos Slim, the Mexican telecommunications billionaire, agreed to consolidate his stakes in Telekom Austria, avoiding the mandatory takeover offer threshold, Reuters reports.
REUTERS
DealBook »
Breakingviews »
Fixed Income Drops at Some Big Banks, but Who’s to Blame?  | Citigroup and Goldman both reported significant slides in fixed-income revenue, and banks tried to blame many factors for that drop-off.
DealBook »
DealBook »
UBS Increases Bonuses for Asia Bankers  | UBS, the Swiss bank, is said to be bolstering its annual bonus payments to its investment bankers in Asia by about 10 percent for 2013, Bloomberg News writes, citing unidentified people familiar with the situation.
BLOOMBERG NEWS
U.S. Banks Reduce Safe Holdings  | United States banks last year decreased their holdings in safe securities like U.S. Treasuries and mortgage-backed securities guaranteed by the U.S. government, calling into question whether new regulations are motivating banks to invest in riskier assets, The Financial Times writes.
FINANCIAL TIMES
Morgan Stanley Announces Promotions  | Morgan Stanley promoted 153 employees to the managing director position, up from 144 a year earlier, Bloomberg News reports.
BLOOMBERG NEWS
Investors Turning to Riskier Investments for Returns, BlackRock Survey Finds  | Investors seeking higher yields are increasingly turning to riskier sectors like real estate and hedge funds, BlackRock found in a survey of 100 institutions released on Thursday.
DealBook »
K.K.R. Sells Stake in German Broadcaster  | The private equity firms Kohlberg Kravis Roberts & Company and Permira Advisers have sold a 16.6 percent stake in ProSiebenSat.1 Media, a German broadcasting company, for about $1.7 billion, Bloomberg News reports.
BLOOMBERG NEWS
RCS Capital to Purchase Broker-Dealer  | RCS Capital announced it would purchase Cetera Financial Group, an independent broker-dealer for about $1.15 billion in cash, Reuters reports. Cetera is backed by the private equity firm Lightyear Capital.
REUTERS
Chinese Firm Starts Hedge Fund  | Citic Capital Holdings, a Chinese investment management firm known for its private equity investing, is raising funds to start its first quantitative hedge fund, The Wall Street Journal reports.
WALL STREET JOURNAL
Corvex Turns Down CommonWealth Board Seat  | Keith Meister, the founder of the activist hedge fund Corvex, pledged to continue his campaign to replace the existing slate of directors at CommonWealth REIT, a real estate investment trust.
DealBook »
Hedge Fund Stays Open After Prostitution Scandal  | Common Sense Investment Management, an Oregon-based hedge fund, will continue to manage money for outside investors after its founder, Jim Bisenius, was arrested for soliciting prostitution, CNBC reports.
CNBC
DealBook »
Santander Unit Takes Aim at Investors With Online Ads  | Loyal3 Holdings, the online brokerage, has purchased online advertising space to market the initial public offering of Santander Consumer USA to retail investors, Reuters reports.
REUTERS
DealBook »
China’s Neway Begins Trading After Freeze  | Neway Valve Company, a Chinese-based maker of industrial valves, became the first initial public offering to commence trading in mainland China after a 14-month freeze on sales of new shares, Bloomberg News reports.
BLOOMBERG NEWS
Andreessen Horowitz Invests in Apparel Company  | Teespring, a Rhode Island-based company that produces custom T-shirts, has raised $20 million in a funding round led by the venture capital firm Andreessen Horowitz, TechCrunch writes.
TECHCRUNCH
Changing Crowd for JPMorgan Health Conference  | Google Ventures, which provides funding to health care start-ups, said it is seeing a wider range of companies in attendance at the JPMorgan Chase’s annual health care conference in San Francisco than in past years, The Wall Street Journal writes.
WALL STREET JOURNAL
British Regulator Steps Up Review of R.B.S. Loans  | The Financial Conduct Authority has hired Promontory Financial and an accounting firm to assist in its review of the Royal Bank of Scotland’s lending practices, including claims that the bank pushed some business clients into serious financial difficulties.
DealBook »
Bernanke Reflects on Time as Fed Chairman  | Ben S. Bernanke on Thursday made what was perhaps his last public appearance as chairman of the Federal Reserve, addressing the financial crisis and policies adopted by the central bank, Binyamin Appelbaum writes in The New York Times.
NEW YORK TIMES
S.E.C. Considering Rules to Bolster Enforcement  | The Securities and Exchange Commission is looking to strengthen its enforcement powers to enforce the Volcker Rule, Reuters reports.
REUTERS
Regulators Propose Guidelines for Internal Oversight  | The Office of the Comptroller of the Currency proposed guidelines on Thursday that would require board members and executives of large United States banks to retain independent audit and risk-management officers to monitor any missteps, The Wall Street Journal reports.
WALL STREET JOURNAL
Magazine Names China’s Central Bank Best of 2013  | The Central Banking Journal awarded the People’s Bank of China the title of bank of the year for 2013, Quartz writes.
New Ratings Agency Hopes to Compete With Big 3 Outside U.S. Â |Â A group of smaller credit rating agencies outside the United States has formed Arc Ratings, a new company that the group hopes will provide a viable alternative to the so-called Big 3 credit rating agencies when it comes to international debt financing.
DealBook »
