- Wells bids TARP farewell. Wells Fargo (WFC) became the last major lender to exit TARP, announcing late Monday plans to repay its entire $25B in TARP loans through a $10.4B stock offering. Coupled with Citigroup's (C) exit early Monday, $161B of the $245B pumped into institutions will have been repaid. The bank also plans to raise $1.35B through a share sale to its benefit plans, and another $1.5B through asset sales. "We're ready to fully repay TARP in a way that serves the interests of the U.S. taxpayer, as well as our customers, team members and investors," CEO John Stumpf said. Previously, he pledged to pay off TARP in a "shareholder-friendly" way. Separately, Wells also said it will buy Prudential Financial's (PRU) 23% stake in their retail brokerage JV for an undisclosed sum in cash and stock.
- BofA can't buy a CEO. Bank of America's (BAC) talks with Bank of New York Mellon (BK) CEO Robert Kelly collapsed over Kelly's $20M+ compensation request, and because of the bank's rules which forbid Kelly from holding both Chairman and CEO titles. Current frontrunners to replace Ken Lewis are Chief Risk Officer Gregory Curl, and Brian Moynihan, who heads up BofA's consumer banking unit. Kelly surprised BNY Mellon employees, who had braced for his departure, by telling them in a letter late Monday, "I'm not leaving BNY Mellon and I look forward to working with all of you to make this great company even stronger."
- Exxon bets big on shale. In a throwback to Merger Monday, ExxonMobil (XOM) said it would buy (.pdf) XTO Energy (XTO) for $31B and $10B in debt assumption, bolstering its position in unconventional natural gas and oil resources. XTO shareholders will receive 0.7098 XOM share per share, a 25% premium to Friday's close. The move allows Exxon to expand in the growth area of shale gas, and will increase its gas resources by 45T cubic feet (about two years of domestic demand). Exxon believes demand for natural gas, which emits half as much CO2 as coal, will rise as the U.S. looks to pare its global warming emissions and the world seeks greener sources of energy. "This is not a near-term decision; this is about the next 10, 20, 30 years," CEO Rex Tillerson said.
- Obama sticks it to bankers, sort of. President Obama told bankers to "take a third and fourth look" at their small-business lending, saying they were obliged to help the recovery after being rescued by taxpayers. U.S. Bancorp (USB) CEO Richard Davis responded by saying his bank would take a second look at every rejected loan, and that he would present the idea to other members of the Financial Services Roundtable. Bank of America (BAC) CEO Kenneth Lewis chimed in, saying BofA would lend $5B more to small- and mid-sized businesses in 2010. JPMorgan (JPM) had previously committed to boost its lending by $4B. Addressing regulatory reform, Obama decried the disconnect between rhetoric and reality: "There's a big gap between what I'm hearing here in the White House and the activities of lobbyists on behalf of these institutions." But some saw the get-together as a PR stunt designed to placate growing populist anger.
- Kraft plays hardball with Cadbury. Kraft (KFT) stood firm in its bid for Cadbury (CBY), questioning Cadbury's bullish projections as a standalone company, and warning shareholders they'll be "taking a risk" if they rebuff Kraft's offer. "We have heard nothing from Cadbury that surprises us. Cadbury's defence document only reinforces our belief that there is a compelling strategic and financial rationale to combining these two companies," Kraft said. "In contrast with the value certainty and upside potential provided by the Offer, Cadbury is asking its shareholders to put their faith in possible future value creation based on a set of long-term targets, never before achieved by Cadbury and subject to significant risk and uncertainty. Furthermore, Kraft Foods notes that Cadbury has chosen to concentrate on long term targets, with very little information on its prospects for 2010."
- 2010: year of sovereign risk. Moody's predicted Tuesday 2010 will be a tumultuous one for sovereign risk. Among the coming year's more ominous themes: an extremely painful debt overhang; potential social unrest; and significant "exit risk" for governments trying to withdraw fiscal stimuli. "2010 will at best see a 'normalization' and at worst a severe tightening in government financing conditions," Moody's said. AAA-rated governments, starting with the U.K. and the U.S., can ill afford another financial crisis - a reality it says will significantly impact policy decisions in coming years.
- Austria bank denies it's teetering. Sources say Austria's central bank put the country's top cooperative bank and No. 4 bank, Oesterreichische Volksbanken, on a watchlist and told it to find a new strategy. The report fuelled concerns that European banks are in a fragile state, sending the euro to a 2.5-month low overnight. A bank spokesman called the report inaccurate, and said the bank is at no risk of nationalization.
- Tackle deficit, or suffer. The U.S. government must figure out how to get its ballooning debt under control or face possible panic in financial markets, a bipartisan panel of budget experts said in a report Monday. The government will need to implement tax hikes and spending cuts by 2012 in order to keep debt at a manageable 60% of GDP by 2018, the Peterson-Pew Commission on Budget Reform said. Otherwise, a loss in investor confidence could drive down the dollar and force interest rates higher, resulting in a sharp decrease in the country's standard of living. "We will be less free if we don't tackle this."
- Goldman faces lawsuit over bonuses. A retirement fund and Goldman Sachs (GS) stakeholder is suing the bank for "blindly" rewarding executives "for corporate performance that has absolutely nothing to do with the skill of the company's employees." The lawsuit seeks to recover "billions in compensation" that Goldman has paid or plans to pay employees. Goldman spokesman Lucas van Praag said the lawsuit is "completely without merit."
- Capital One's delinquencies rise. Capital One Financial (COF) reported increases in delinquencies and chargeoff levels for U.S. credit-card customers in November from the month earlier. Chargeoffs - credit-card debt the company doesn't believe it will be able to collect - rose to 9.6% in November from 9.04% in October, while 30-day delinquencies rose to 5.87% from 5.72%. Auto financing was a bright spot: chargeoffs declined to 3.67% from 4.32%.
- Gilead's blood pressure drug flops. Gilead Sciences (GILD) said late Monday it was discontinuing a Phase III study of its hypertension drug darusentan after the once-daily pill failed to outdo a placebo. The results came as a surprise; a previous Phase III study showed positive results, but raised concerns about side effects.
Earnings: Before Open
Earnings: Mon. After Close
- VeriFone (PAY): FQ4 EPS of $0.26 beats by $0.01. Revenue of $218M (-11%) vs. $213M. Sees Q1 EPS of $0.22-0.23 vs. $0.24, on sales of $215M-218M vs. $213M. Shares -2% AH. (PR)
Overseas markets moved lower Tuesday. Futures suggest a soft open.
- Asia: Nikkei -0.2% to 10083. Hang Seng -1.2% to 21814. Shanghai -0.9% to 3274. BSE -1.3% to 16877.
- Europe at midday: FTSE -0.7% to 5279. CAC -0.2% to 3824. DAX -0.2% to 5791.
- Futures at 7:00: Dow -0.2% to 10414. S&P -0.2% to 1106. Nasdaq -0.2%.
Crude+0.2% to $69.70. Gold -0.8% to $1,115.
30-year Tsy -0.11%. 10-year -0.08%.
Euro -0.7% vs. dollar. Yen -0.75%. Pound -0.5%.
Tuesday's Economic Calendar
- 7:45 ICSC Retail Store Sales
8:30 Producer Price Index
8:30 Empire State Mfg Survey
8:55 Redbook Chain Store Sales
9:00 International Capital Flow
9:15 Industrial Production
10:00 Results of $75B, 28-Day TAF Auction
12:00 PM FOMC Meeting, Day 1
1:00 PM NAHB Housing Market Index
5:00 PM ABC Consumer Confidence Index
- Notable pre-market earnings: BBY
- Notable post-market earnings: ADBE, AIR
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