News round up: Bank of America, Royal Bank of Scotland, Thomas Cook, Bank of Spain, Next and John Lewis.
The Chief Executive Officer of the Bank of America corp (NYSE:BAC), Brian Moynihan, has sold 9,527 shares of the US lender at $5.56 each, an announcement which came on the same day the bank suffered a legal setback in a dispute with bond insurer MBIA.
MBIA has accused Bank of America subsidiary Countrywide Financial of being less than forthcoming about the risk profile of $20bn worth of mortgage-backed securities that MBIA was asked to insure. MBIA's beef dates back to a period spanning from 2005 to 2007, the period before mortgage backed securities became more toxic than a three-year-old British Rail sandwich laced with arsenic.
Justice Eileen Bransten of the New York State Supreme Court ruled that in order to demonstrate fraudulent intent on the part of Countrywide, MBIA only needs to show that Countrywide had misled it about the instruments it insured, not that the cause of MBIA's losses were due to the alleged misrepresentation, writes Sharecast.
Royal Bank of Scotland
As many as 10,000 jobs could be culled at the Royal Bank of Scotland as it dramatically downsizes its global banking and markets division. These cuts and an expected £1bn to £2bn of restructuring costs are considered the
worst-case scenario by the bank, it was reported in the Financial Times. RBS is asking bidders interested in buying parts of its investment banking arm to submit offers before the end of the month. The US investment bank Lazard has been hired by RBS to run the process, which could see the bank offload businesses such as equities and corporate finance, The Telegraph reports.
Thomas Cook's parlous financial position has been laid bare after the holiday company admitted it had asked for permission to defer an £850,000 severance payment to former chief executive Manny Fontenla-Novoa. The company said it had postponed the payout in the wake of a cash crisis that forced it to hand its lenders a 4.9% stake in the business.
Thomas Cook said it had agreed a £851,114 payment but added: "Due to [a] deterioration of the company's forecast year-end headroom position after agreement was reached, Mr Fontenla-Novoa agreed to a deferral of the due date for payment until after the seasonal cash low point at the end of December." The agreement is likely to renew fears among shareholders over the group's financial position, The Telegraph says.
The Bank of Spain
Spain is to carry out an “imminent” restructuring of its banking industry, its Economy Minister said yesterday. Luis de Guindos said that the reforms would be outlined in the next few weeks. It is thought that the Government might force banks to devalue their property assets by an average of 20%. Spain has a stockpile of about 700,000 unsold empty homes, partly because property is regarded as overpriced.
The Bank of Spain estimates that lenders are struggling with “troubled assets” of €176bn (£145bn) linked to the collapse. This is curbing lending and restricting hopes of recovery. The Government is likely to merge small banks and savings banks, which do not have the capital to sustain the devaluation of their property assets, The Times reports.
Next and John Lewis
The fortunes of two of the UK's biggest retailers diverged during the crucial Christmas trading weeks, with Next yesterday reporting "disappointing" sales at its high street stores while John Lewis trumpeted "outstanding" figures after the chain proved a magnet for gift buyers.
Next's chief executive, Lord Wolfson, blamed a frenzy of unplanned discounting by rivals and the mild autumn weather for weaker than expected sales at its stores and predicted another tough year as turmoil in the eurozone and high unemployment hit consumer confidence. "December was definitely disappointing, as we didn't see a boost in the weeks that we saw a lot of snow last year," he said, adding that after 2010 disruption perhaps Britons had "learned not to spend so much at Christmas," The Guardian writes.