DealZone

Taxpayer dollars losing appeal?

CashWhen the U.S. government started handing out taxpayer dollars to banks under TARP last fall, hundreds of banks lined up. To many, government money was cheaper than the terms they were getting in private and public markets.

“That really, in effect for several months, put a lot of our discussions with issuers really on hold,” said John Duffy, CEO of investment bank KBW, which specializes in the financial services sector.

Now, the pendulum may be swinging away from the government.

The Obama administration has made it clear that the recipients of more capital will have to live under dictates on what they can and cannot do with the money — dividend restrictions, executive compensation caps and such.  

And now the private market may be becoming more attractive to banks, despite private equity seeking better terms like asking for a more senior position than just common shares in investments, Duffy said.

“The longer this environment exists, the more there will be capitulation on the part of banks or potential issuers that the government is forcing them to go get that capital,” Duffy said on a conference call after announcing results. “And I think the capital out in the public or private markets is maybe more appealing than the terms attached on the latest government plan.”

from Global Investing:

Careful what you say

Bank executives beware. Turn your microphones off during what are likely to be stormy shareholder meetings this year.

Insults are likely to fly at many bank AGMs this year from shareholders angry at their board for losing billions, sending shares crashing, making ill-advised purchases or for their role in the global economic crisis. Bankers are unpopular after more than a year of grim news.

But an unnamed director at Santander lacked humility this week.  After heated questions from the floor about the Spanish bank's purchase of U.S. lender Sovereign and its exposure to the alleged Bernie Madoff fraud, some shareholders applauded a critical comment.

Goldman draws bailout critic’s ire

Goldman SachsFirst Bill Perkins likened the architects of the $700 billion U.S. bailout to communists. Now the Houston-based venture capitalist is going after the capitalists.

In his latest full-page ad in the New York Times, Perkins raises a question about the propriety of Goldman Sachs buying the majority of Constellation Energy’s London-based commodities business.

“Question #1: Does anyone else find it troubling that a government bailed out bank (Goldman Sachs) is buying a European Energy Speculation Outfit? It’s your money!!!”

Dimon: never say never

Jamie DimonJPMorgan’s Jamie Dimon may have enough on his plate – for now.

With the bank still digesting its two major purchases from last year — Washington Mutual’s banking operations and Bear Stearns — Dimon seems ready to take a break from deals and focus on integration.  

A worsening economy is also keeping the industry on edge. “Common sense tells you it will get worse and we should prepare for that,” Dimon said on a conference call after the bank announced lower fourth-quarter profit. He said 7.5 percent to 8 percent unemployment is “the minimum we’ll see.”

JPMorgan is “not out there looking” for an acquisition. And there is nothing that the bank is looking to divest, Dimon said.  

Wilbur still wants a bank

Wilbur RossWilbur Ross is still in the running for a bank, although his plans to buy one were delayed when the U.S. government stepped in with its $700 billion package to bail out the sector, the investor told CNN Money in an interview.

The rescue package delayed Ross’ plans by six to 12 months, the report said.

“We will end up with a bank, there is no doubt about that,” the report quoted Ross as saying.

Crystal ball: PE active in finance

Crystal ballHaving largely held off from picking up cheap financial services assets last year, private equity firms will boost their buying as low valuations make assets in the sector too attractive to pass up, a new report predicts.

The increased interest will come as these firms look for ways to  use funds raised in the last two years and regulators further loosen restrictions on ownership of banks, independent advisory firm Freeman & Co projects in its annual summary on transactions. Buyout shops have about $600 billion to work with.

Private equity tested the financial sector waters last year – and sometimes got burned. But they have continued to look at the sector with interest. Private equity firms put in $23 billion in 84 financial services deals last year, down 69 percent from 2007, Freeman said.

Another credit hit

JPMorgan ChaseThe latest in ten-digit red ink has landed, this time from JPMorgan, which said in a regulatory filing late on Monday that it had lost about $1.5 billion since July. It cited the usual culprits: turmoil in the credit and mortgage markets and wider credit spreads and lower levels of liquidity. JPMorgan’s shares were down more than 4 percent at the open. JPMorgan has written down a total of about $33 billion, and total write-downs since the credit crunch started have been about $341 billion.

Mitsubishi UFJ Financial Group, Japan’s largest bank, said it would bid $3 billion to buy the remaining 35 percent of California’s UnionBanCal, as it looks for growth beyond its softening home market. The purchase represents a significant bet by Mitsubishi UFJ, which is looking to increase its presence in the United States even as the world’s largest economy continues to stumble through the subprime mortgage crisis. Saddled with slow economic growth and a declining population at home, Japanese financials, which have avoided much of the subprime meltdown, are increasingly aiming to boost their small market shares in the West.

Other deals of the day:

* Italy’s Enel said it had bought 10 percent of PT Bayan Resources Tbk for about 138 million euros ($205.5 million) by taking part in the Indonesian coal miner’s initial public offering.