Breakingviews

Brian Moynihan can’t ignore Citi’s regime change

By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

Bank of America boss Brian Moynihan can’t ignore the regime change at cross-town rival Citigroup. His three years in the corner office is less than Vikram Pandit had, but he faces the same challenges to boost performance. BofA’s third-quarter return on equity of just 6.3 percent is a case in point. While improving, Moynihan needs to do more before he, too, clashes with his board and shareholders.
 
The results weren’t as bad as implied by the dismal $340 million headline profit reported on Wednesday. One-offs like the $1.9 billion charge for the bank’s improving credit quality and a $1.6 billion hit for litigation costs, including the settlement of the Merrill Lynch class action suit, took a big bite out of earnings.

Latest attempt to find Libor victim: Main Street

By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

The Libor scandal is still in search of victims. Now a group of U.S. homeowners has accused 12 banks of booking illicit profit from nudging the London Interbank Offered Rate benchmark higher. Bringing Main Street into the affair could add to political pressure for tougher regulation. Even so, it’s hard to see how more than a tiny amount of harm was done.

Starbucks cross-border tax tactics fail taste test

By Edward Hadas

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Never underestimate the power of a government which changes its mind. The managers of Starbucks might want to contemplate that adage. The U.S.-based coffee chain reported last year a loss of 33 million pounds on revenue of 398 million pounds at its UK subsidiary for tax purposes, according to a Reuters report. The company does not disclose accounting results by country, but operating profit margin of the international business stood at 13 percent.

Pandit succumbs to “three strikes you’re out” rule

By Rob Cox
The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Vikram Pandit succumbed to the most basic rule of thumb: three strikes and you’re out. A trio of Citigroup misfortunes, not all of the chief executive’s making – the bank’s dividend policy, his own compensation and the sale of Smith Barney – eroded the confidence of shareholders, regulators and the board. And they couldn’t have been much fun for Pandit to endure, especially after successfully navigating Citi to stability.

Investors may live with outrageous News Int payoff

By Robert Cole

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

Shareholders in News Corp would be forgiven for being outraged at a report that Rebekah Brooks, the former CEO of News Corp’s UK newspapers, has received a 7 million pound “payoff”. She left her post in July last year as allegations of phone hacking engulfed the News of the World and led to the abrupt closure of the Sunday tabloid owned by the company.

Solid quarter doesn’t bust ghost of Dimon’s whale

By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

JPMorgan’s solid third quarter has put Jamie Dimon back on track. The U.S. bank’s boss had $5.7 billion of profit in the quarter to crow about – a third more than a year ago. His standing took a drubbing earlier this year after dodgy hedging transactions, known as the whale trades, cost the firm about $6 billion. Now he can breathe easier. But one good report doesn’t bust the ghost of the whale.

BAE needs a new chairman

By Chris Hughes

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

BAE Systems needs a new chairman. Dick Olver’s management of the attempt to merge the UK defence group with EADS was poor. He has also presided over a sustained period of share-price underperformance. After eight years on the board, he should make room for fresh talent.

Softbank-Sprint tie-up gets bad signal from market

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

By John Foley

Softbank chief executive Masayoshi Son has received a strong signal from investors. They wiped $6.2 billion in value off the Japanese telecoms operator’s market value on Oct. 12 after it confirmed it was in talks with U.S. rival Sprint Nextel. That’s three times more than U.S. investors added to Sprint’s worth the previous day. No wonder: a takeover would be a financial stretch for Softbank, and could preclude other deals closer to home.

U.S. banking overhaul gets a second wind

By Agnes T. Crane
The author is a Reuters Breakingviews columnist. The opinions expressed are her own.

The push to overhaul the U.S. banking sector is getting a second wind. Two years after the 848-page Dodd-Frank financial reform act thudded onto desks across Wall Street, regulators, politicians and even banking grandees are back out on the stump talking up ideas that were left on the cutting-room floor. Fresh on the heels of the hoopla to break up banks, the Federal Reserve’s top cop is advocating capping their size. It’s increasingly evident that too big to fail remains too big a concern.

Wall Street, City pay still must fall by a third

By Antony Currie and Richard Beales
The authors are Reuters Breakingviews columnists. The opinions expressed are their own. This view has been updated to reflect refined inputs to the Breakingviews calculator.

James Gorman is right that investment banking is overstaffed and overpaid, as he told the Financial Times last week. But neither the Morgan Stanley boss nor his global peers have proven adept at taking action. Last year, total wages at securities firms that are members of the New York Stock Exchange and the average pay per employee in New York increased even as industry profit fell, according to a report this week from the state’s comptroller.