Archive for June, 2009

Bank of NY Mellon sees writedowns, 2009 profit: report (Reuters)

Saturday, June 27th, 2009 | Finance News

ZURICH (Reuters) –
Bank of New York Mellon Corp (BK.N) will have further writedowns as a result of the securitized mortgages it still has on its books, the bank's chief executive was quoted as saying on Saturday.

"Yes, we will book further writedowns but we will be able to handle them. The securitized mortgages on our books amount to $3 to $4 billion, which corresponds to only 2 percent of our balance sheet," CEO Robert Kelly told Switzerland's Finanz und Wirtschaft.

Kelly said the bank, which saw first-quarter profit fall more than expected in April, would be profitable in 2009.

"BNY Mellon has posted a profit in all quarters of the crisis. We will also be profitable in 2009," he said.

Bank of New York Mellon, which is working on expanding its presence in China, would like to grow in continental Europe and Asia, Kelly said.

(Reporting by Katie Reid; editing by Sue Thomas)

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U.S. commercial banks see record Q1 trading revenue (Reuters)

Friday, June 26th, 2009 | Finance News

NEW YORK (Reuters) –
U.S. commercial banks reported record trading revenue in the first quarter of 2009, benefiting from wide trading margins and gains from interest rate products, the Office of the Comptroller of the Currency said on Friday.

Banks generated a record $9.8 billion in revenue from trading derivatives and cash instruments, compared with a loss of $9.2 billion in the fourth quarter of 2008, the OCC said.

Interest rate products, including derivatives, generated the strongest revenue, rising to a record $9.1 billion, compared with a $3.4 billion loss in the previous quarter, the OCC said. Credit trading was the only asset class to generate a loss, of $3.2 billion, trimmed from a fourth-quarter loss of $8.9 billion.

Foreign exchange revenue fell to $2.4 billion from $4.1 billion in the fourth quarter, while equity trading generated $1 billion in trading revenue compared to a fourth quarter loss of $1.2 billion, the OCC said.

Trading revenue were boosted as banks wrote down fewer losses from bad loans and recorded the declining value of their debt as a liability. Banks can book the deteriorating value of their own debt as trading revenue.

"While trading performance was strong even without the liability value changes, this source did add materially to first quarter trading performance," the OCC said.

Notional volumes in all derivatives markets increased by $1.6 trillion in the quarter to $202 trillion, as more derivative contracts were recorded by commercial banks that had formerly been investment banks.

The notional volume does not represent the actual amount of risk as it includes a number of trades that offset each other. Eighty-nine percent of derivatives exposures at commercial banks were eradicated from netting positions in the first quarter, the OCC said.

LARGEST BANKS

JPMorgan Chase & Co(JPM.N), Goldman Sachs Group Inc (GS.N), Bank of America Corp (BAC.N), Citigroup (C.N) and HSBC Bank USA, part of HSBC Holdings (HSBA.L), have the largest derivatives exposures of U.S. commercial banks and account for 96 percent of total exposures, the OCC said.

As of March 31, their notional derivative exposures stood at $81.2 trillion, $39.9 trillion, $38.9 trillion, $29.6 trillion and $3.5 trillion, respectively.

Of these banks, Goldman had by far the largest credit exposure relative to its risk-based capital, at 1,048 percent, the OCC said. HSBC, JPMorgan, Citibank and Bank of America's ratios stood at 475 percent, 323 percent, 216 percent and 169 percent, respectively.

Goldman also got the largest overall boost from derivatives and cash trading revenue, which represented 69 percent of the bank's gross revenue in the quarter, the OCC said.

Trading revenue for JPMorgan represented 13 percent of its gross revenue and contributed 8 percent of both Citigroup and Bank of America's gross revenues. HSBC Bank USA's gross revenue lost 4 percent from trading revenue.

JPMorgan, Bank of America, Goldman Sachs, Morgan Stanley (MS.N) and Citigroup had the largest derivative exposures of all holding companies, at $81.1 trillion, $77.9 trillion, $47.7 trillion, $39.1 trillion and $31.7 trillion, respectively.

(Reporting by Karen Brettell; Editing by Padraic Cassidy)

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Prosecutors ask judge to imprison Madoff for life (Reuters)

Friday, June 26th, 2009 | Finance News

NEW YORK (Reuters) –
Swindler Bernard Madoff should spend the rest of his life in prison, U.S. prosecutors argued on Friday, citing the "unique scope and duration" of his crimes as the leader of Wall Street's biggest fraud.

Madoff will be sentenced on Monday after pleading guilty in March to 11 criminal charges including securities fraud, money laundering and perjury in an investment scheme involving tens of billions of dollars.

"Madoff's crimes were of extraordinary dimensions," the prosecutors' memorandum to a Manhattan federal court judge said. "For example, the fraud loss known to date, which is greater than $13 billion, is more than 32 times the baseline level that would carry a sentence of life under the U.S. sentencing guidelines."

It said about $170 billion flowed into the principal account used by Madoff in his decades-long scheme. It said he bilked thousands of people and caused economic hardship to individuals, charities and for-profit institutions.

"A reasonable sentence in this case would be the guidelines sentence of 150 years, or alternatively, a term of years that both would assure that Madoff will remain in prison for life, and forcefully would promote general deterrence."

The uncovering of the scheme and Madoff's arrest in December led to calls for stricter oversight of firms.

Madoff's lawyer Ira Lee Sorkin declined to comment on the memorandum because he said he had not yet read it.

The government argued that the Madoff case bore no comparison to corporate frauds of recent years such as WorldCom Chief Executive Bernie Ebbers and Adelphia's John and Timothy Rigas. Ebbers is serving 25 years and the Rigases 12 years and 17 years, respectively.

"Madoff's conduct is unique in its scope and duration," the memorandum to U.S. District Court Judge Denny Chin said.

It also cited a June 25 letter from counsel for the trustee winding down Bernard L. Madoff Investment Securities LLC saying that Madoff had not cooperated.

"Mr. Madoff has not provided meaningful cooperation or assistance to the Trustee since his arrest," the letter signed by lawyer David Sheehan said.

Madoff's lawyer, in papers submitted to the judge this week, argued a sentence of 12 years would be sufficient. Sorkin also asked the judge not to give in to the "mob vengeance" sought by those Madoff defrauded.

Sorkin cited a recent meeting between the jailed Madoff and the inspector general of the U.S. Securities and Exchange Commission as being helpful to regulators. But prosecutors said on Friday the official "had informed the government that Madoff's information will not 'shape and fortify the future of Wall Street regulation and oversight.'"

The government said statements sent to the court by defrauded investors, showed he "was not only responsible for wiping away the financial resources of many generations within families but also for causing profound levels of stress and emotional injury."

In its memorandum on Friday and in other court papers, prosecutors said that as of November last year, Madoff's firm issued account statements that held a total of about $65 billion when in fact he had not bought any securities.

Madoff and his wife Ruth have agreed to the sale of three of their luxury properties and other assets and valuables, according to court documents filed separately on Friday.

The properties to be sold include the couple's $7 million apartment and primary residence in Manhattan, an $11 million house in Palm Beach, Florida and a $3 million home in Montauk on New York's Long Island. The Florida property and several vessels have already been seized by U.S. Marshals.

The case is USA v Madoff 09-213 in U.S. District Court for the Southern District of New York (Manhattan).

(Reporting by Grant McCool; Editing by Richard Chang)

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