DealZone

UBS and the UK banks shake-up

Some cheering news on an otherwise tough day for UBS - the Swiss bank has bagged key roles for both Lloyds and RBS, as the two British banks agree to a massive shake-up that involves taking 31 billion pounds more of government money. As Victoria Howley and Daisy Ku wrote earlier:

“UBS AG (UBSN.VX) has taken key roles on two landmark deals to shore up British banks — landing the Swiss bank a welcome boost in fees and prestige on the same day it shocked the market with worse-than-expected results.

“UBS is working alongside Bank of America Merrill Lynch (BAC.N) to raise 13.5 billion pounds ($22 billion) for Lloyds Banking Group Plc (LLOY.L) in the world’s largest rights issue.

“It is also working with Morgan Stanley (MS.N) to advise Royal Bank of Scotland Plc (RBS.L) on its participation in the UK government’s Asset Protection Scheme (APS). [ID:nL3540088]

“UBS’s advisory team is led by Alex Wilmot-Sitwell, co-chief executive of the investment bank, and Chris Fox, a managing director in the bank’s London financial institutions group.

from Alexander Smith:

Doting investors bail out UK Plc

Like doting parents of teenagers who have spent their allowance and keep coming back for more, shareholders have so far been extraordinarily forgiving when stumping up cash to bail British companies out of debt. At some point, however, they will lose their patience and say "no".

Housebuilders Barratt and Redrow are the latest to raise cash from shareholders via heavily discounted rights issues, joining a long list of companies who have gone cap in hand to investors for sums of more than 100 million pounds ($163.4 million) since the start of the year.

For now at least, everyone can feel good about the result. A rising stock market since March means shareholders can say they did the right thing in giving companies the cash needed to pay down debt, defend their credit ratings or write down previous corporate follies.

Small things matter

Interesting detail in a research note on Thursday from Credit Suisse, highlighting how it pays for bankers to sweat the small stuff in these lean times.

The bank’s own research and Dealogic data shows that deals worth less than $100 million have generated average success fees equivalent to nearly 1.2 per cent of the value of the transaction this year. Deals worth $1 billion or more have yielded just 0.2 percent.

As I wrote earlier, Credit Suisse also says that M&A may replace fixed income as a driver of investment banking revenues in coming quarters as the high-grade bond bonanza draws to a close.

AIG investor questions PwC fees

PWCAt AIG’s annual meeting, one upset shareholder pointed out how much PwC, the insurer’s independent auditor, had been paid over the past two years. AIG paid PwC a total of $131 million in audit and other fees in 2008 and $119.5 million in 2007. ”I want to know what these fees were paid for,” shareholder Kenneth Steiner of Great Neck, New York said. “Why didn’t anybody know what was going on? What were the accountants doing? Were they sleeping?”The fees look large but are not unheard of.  GE, for instance, paid KPMG $133 million in 2008 and $122.5 million in 2007.Still, Microsoft paid its auditor, Deloitte & Touche, a fraction of that — only $27.9 million in 2008 and $23.5 million in 2007.AIG CEO Edward Liddy defended PwC, saying the auditor had raised early concerns about controls at the division blamed for AIG’s near collapse — AIG Financial Products. ”PricewaterhouseCoopers conducted itself well over the last couple of years,” Liddy said. “They put a material weakness on the company with respect to its controls around FP (AIG Financial Products).”

JPMorgan slashing research, ex employees say

NEWYORK-BEAR    JPMorgan is cutting 30 percent of its research department, according to two former employees, but the bank is keeping mum about its plans and declined to give details of the cuts.
    David DeRose and Leighton Thomas, co-founders of a Bear Stearns alternative research unit that moved to JPMorgan when that bank acquired Bear a year ago, said on Wednesday they sold the unit to an investment firm largely because they could not hire more staff under JPMorgan’s management.
    “If you stay under a research division that’s being cut 30 percent, we can’t get any headcount,” said DeRose.
    JPMorgan intends to shed 1,000 to 2,000 jobs from its investment bank this year, co-investment bank chief Steve Black said at the bank’s investor day in February.
    It was unclear whether the cuts DeRose mentioned are included in these figures and a JPMorgan spokesman declined comment.
    Research staff may be an easy target for cuts, since it is hard to quantify their contribution to the bank’s bottom line.
    And banks’ research divisions across Wall Street have been shrinking since the Securities and Exchange Commission in 2002 banned firms from using banking fees to pay analysts.

By Elinor Comlay

(Be)league(red) tables

Preliminary first-quarter data from Thomson Reuters on mergers and acquisitions (M&A) and capital markets are out. And unsurprisingly, spring has not sprung in investment banking, with the big exception of a record deluge of corporate bonds.

Fees across investment banking (M&A, loans, and debt and equity capital markets) halved, while fees for completed M&A topped that with a 68 percent fall. Overall announced M&A fell by a third, compared to the same period last year, to $444 billion.

And even that figure is flattered by two huge pharma deals, which bankers doubt will be followed by more of the same, and a flurry of bank bailouts.

In a spin

Financial public relations firms, who elevated the honing of corporate messages to a highly profitable art form, are having to adapt their businesses and in some cases cut staff as the economic gloom intensifies.

With far fewer deals to publicize and lucrative “retainer” contracts under pressure, companies are cutting costs and are increasingly focusing on work thrown up by the crisis, such as capital-raising, restructuring and repairing tarnished images.”

So what exactly are they up to?

Some recent pr industry blogs and other web postings shine a light on some of the spinmeisters’ latest tactics.