Saturday, November 05, 2011
Citi posts 74 % rise in Q3 net income
Resuscitating its flagging credit card business, Citi said that although its core revenue fell during the same period its latest income figures included a $1.9 billion accounting gain related to its credit holdings. The profit growth, at 84 cents a share, beat analyst expectations which were closer to 81 cents a share.
Citi Chief Executive Vikram Pandit was said to be celebrating “another quarter of solid operating results” after reports that he had decided to revive the group's “private-label credit cards business, which had been slated for disposal”. Citigroup accepted a total of $45 billion from the Treasury to shore up its debilitated balance sheet during the worst of the financial crisis in 2008. Of that assistance, it repaid $20 billion and the balance of $25 billion was converted into common shares held by the Treasury. Being one of the seven U.S. corporations that received support through the Troubled Asset Recovery Programme, Citigroup was subject to executive compensation controls, which were, however, lifted after the U.S. Treasury offloaded the last of its stake in the company towards the end of last year. The sale of the Citi stake fetched the American taxpayer close to $12 billion in profits.
Labels: Citigroup, TARP, U.S. Treasury, Vikram Pandit
Wednesday, July 21, 2010
U.S. Fed optimistic on TALF protection
In a sign that one of the areas at the heart of the financial markets meltdown might be recuperating, the Board of the Federal Reserve announced that it had agreed with the United States Treasury Department that the Treasury could reduce the credit protection it provided for the Term Asset-Backed Securities Loan Facility (TALF) under the Troubled Asset Relief Program (TARP).
Agreeing a reduction in the protection from $20 billion to $4.3 billion, the Fed Board noted that it had earlier authorised up to $200 billion in TALF loans, but when the program closed on June 30, 2010, there were $43 billion in loans outstanding.
The Fed added that under the TALF its New York branch had extended loans to investors in highly rated asset-backed securities (ABS) and commercial mortgage-backed securities (CMBS). “By encouraging issuance of ABS and CMBS, the TALF was designed to increase credit availability and support economic activity,” the central bank said in a statement.
It added that although the TALF extended $70 billion in loans, many TALF loans, which have initial maturities of three or five years, had been repaid early and, to date, “the TALF program has experienced no losses and all outstanding TALF loans are well collateralised”.
The Fed Board further said it viewed as highly likely the possibility that that the accumulated excess interest spread under the programme would cover any loan losses that may occur “without recourse to the dedicated TARP funds”.
Labels: TALF loans, TALF protection, TARP
Monday, November 16, 2009
Stimulus-driven recovery
From The Hindu
As the United States economy continues to battle recessionary conditions, recent months have seen developments that some have hailed as indicators of economic recovery. First, stock markets witnessed an unexpected rally from early March, with the Dow Jones industrial average jumping 57 per cent — however volatility has soared since the crisis began, with $6.9 trillion of U.S. shareholder value wiped out in 2008 alone. Secondly, banks that accepted taxpayer money under the Troubled Asset Relief Program, including Goldman Sachs, J.P. Morgan, Morgan Stanley, and U.S. Bancorp, repaid their debt to the federal government. Subsequently, some of them went on to make record trading profits even as commercial banking languished, most notably Goldman Sachs which made $3.44 billion in profits for the second quarter. Thirdly, the U.S. economy posted growth results that heralded, technically, the end of the recession. Supported by massive stimulus packages to banks and automobiles, the third-quarter growth rate of 3.5 per cent marked the first quarter of positive growth in more than a year.
But juxtapose these indicators of recovery with the looming symptoms of recession that remain, and optimism about a full-fledged return to pre-crisis conditions seems hollow. Unemployment in the U.S. recently climbed to 10.2 per cent and, by some predictions, will remain above 8 per cent even two years from now. After the end of the ‘cash for clunkers’ scheme aimed at boosting automobile sales, many of the large car manufacturers reported a sharp fall in sales in September. Quantitative easing by the U.S. Federal Reserve has made little difference to bank lending to customers — total consumer credit decreased at an annual rate of 6 per cent in the third quarter of 2009, according to the Fed. The International Monetary Fund predicts that economic growth in the near-term will be “sluggish, credit constrained, and, for quite some time, jobless.” There is general agreement that the signs of what looks like a recovery are driven by the massive fiscal stimuli supplied. There is even a risk that these signs will encourage conservative lobbies to press for rolling back fiscal deficits. Such misguided efforts must be resisted if the current low ebb of economic activity is to revive. A premature 1930s-style rollback runs contrary to the need for even higher levels of spending on public infrastructure and social services, vital to individuals and households who will remain in the vice-like grip of housing foreclosures and job losses for years to come. President Obama cannot afford to be fearful of deficits.
Labels: cash for clunkers, deficit, Dow Jones, Goldman Sachs, IMF, J.P. Morgan, Morgan Stanley, quantitative easing, recession, recovery, stimulus package, TARP, U.S.
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