- IMF funds to stave off denouement of Greek tragedy. Greece will soon have enough money to take it through to September after the IMF pledged to release in July an installment of the country's €110B bailout even if the EU fails to finalize a second bailout, as it had promised. However, Greece's rescuers continued to demand that Prime Minister George Papandreou push through budget cuts that have sparked a revolt in his governing Socialist party and mass protests. Papandreou today replaced the finance minister ahead of a parliamentary confidence vote due next week. On Sunday, EU finance ministers will meet to discuss the bailout and try to agree on whether private bondholders should share the burden.
- RIM running out of juice? RIM (RIMM) shares plunged 14.35% in post-market trading after the BlackBerry maker reported earnings and provided guidance that were both below analyst expectations. RIM said FQ1 net profit slumped to $695M from $769M even as revenue rose 16% to $4.9B, and it lowered its FY EPS outlook to $5.25-$6 from a prediction given in April of $7.50. RIM also said that it had been hurt by product delays and that the launch of its PlayBook tablet "did not go as smoothly as we had planned." Analysts said the company is suffering from an aging product lineup that is inferior to Apple's (AAPL) iPhone and Android devices. Comedian Ronnie Corbett recently declared that 'My BlackBerry is not working," to which the reply was, "What's the matter, it run out juice?" Investors might be wondering the same about RIM.
- Oracle sues Google for billions of dollars. Oracle (ORCL) is seeking billions of dollars in damages from Google (GOOG) for infringing patents and copyrights related to the use of the Java programming language in the latter's Android software, newly disclosed court filings show. Oracle sued Google in August last year and requested a ruling that would ban the further use of its IP, and force the destruction of all products that violate Java-related copyrights. Google said Oracle's method for calculating damages "is based on fundamental legal errors and improperly inflates their estimates.” Google also said the patents are invalid and not infringed, and that Android users anyway have a license to any patents in the case.
- Capital One to buy ING Direct for $9B. Capital One (COF) has beaten out bids from GE Capital (GE) and CIT Group (CIT) to buy ING’s (ING) U.S. online bank for $9B. The purchase of ING Direct will enable Capital One to extend its offerings beyond credit cards and other consumer lending, and it expects the new unit to add to its EPS from next year. Capital One also said the acquisition will lead to $200M in lowering funding costs. Under the deal, Capital One will pay $6.2B in cash and $2.8B in shares, giving ING a 9.9% stake; the Dutch bank will get a Capital One board seat as well.
- SEC may charge ratings agencies. The SEC may bring civil fraud charges against credit-rating companies for their role in the financial crisis, sources said. The regulator is investigating S&P (MHP) and Moody's (MCO), and is focusing on whether the agencies committed fraud by not doing the research necessary to adequately rate the subprime mortgages and other loans that underpinned mortgage-bond deals. Firms assigned triple-A ratings to many of these securities prior to the crisis, and then downgraded them en masse when the housing market collapsed. The SEC may have trouble bringing cases, though. In May, a judge ruled that the agencies' ratings are protected by the First Amendment.
- Biggest banks set for higher capital requirements. The world's largest banks are facing an extra capital requirement of 2.5% of their assets that would be on top of the ‘Basel III’ minimum of 7% set by regulators last year. Sources said the banks include Citigroup (C), JPMorgan (JPM), Bank of America (BAC), HSBC (HBC) and Barclays (BCS). As part of efforts to make large banks more resilient and protect the financial system, regulators are due to discuss next week proposals in which the surcharge a bank receives is based on its size, global reach, structural complexity and whether other banks could absorb its businesses. Several banks in a lower category would get a 2% surcharge, while 10-15 small banks would have hold to 0.5-2% extra.
- Leonard Green, CVC to submit bid for BJ's Wholesale. Private equity firm Leonard Green has teamed up with CVC Capital to make an offer for BJ's Wholesale Club (BJ), which has a market capitalization of $2.6B. As of yesterday, Leonard Green and its affiliates had a 9.3% stake in the third-largest U.S. wholesale club retailer.
- Pandora hammered on second day. The love affair with Internet IPOs appears to over - until the next one comes along, that is - with shares in Pandora Media (P) collapsing 24% on only its second day of trading. The close of $13.26 was below the listing price of $16 as fears about competition and Pandora's lack of profitability overshadowed initial enthusiasm for the stock. “The barriers to entry are not very high, and the innovation is really taking place at the speed of light,” said one investment manager. Competition comes from CBS’s (CBS) Last.fm and start-ups, as well as cloud music services from Apple (AAPL), Google (GOOG) and Amazon (AMZN).
- Nasdaq bids for LCH.Clearnet stake. Nasdaq OMX (NDAQ) has confirmed it has made a bid for a minority stake in LCH.Clearnet, operator of the world’s largest swaps clearing house. At an industry conference, Nasdaq CEO Robert Greifeld said LCH’s flagship SwapClear interest rate clearing service would be a 'natural corollary' to the International Derivatives Clearing Group, a Nasdaq unit. NYSE Euronext (NYX) and the London Stock Exchange (LDNXF.PK) have also reportedly made offers for LCH.Clearnet, although the LSE has said it is not in talks.
- Citi hits hurdles in attempts to sell unit. Citigroup's (C) drawn-out efforts to sell consumer unit CitiFinancial have reportedly hit a stumbling block as potential bidders worry about the division's health as a standalone business. Just three groups remain in the bidding process, and are waiting for a report on the unit's finances. CitiFinancial has a book value of about $2B and $13B of assets.
- Wells Fargo stops making reverse mortgages. Wells Fargo (WFC) will no longer offer reverse mortgages, as home prices are too unpredictable. Wells has been the market leader, making nearly 25% of all reverse mortgage loans in the 12 months through May. Around 1,000 people who worked on the product, which made up 2.2% of Wells' consumer mortgage volume, will be offered other jobs. Reverse mortgages enable senior citizens to receive loans backed by their homes via monthly payments. The debt is usually repayed when the borrower moves or dies. Wells is the latest bank to exit the field, with Bank of America (BAC) having done so in February.
Earnings: Thursday After Close
- Research In Motion (RIMM): Q1 EPS of $1.33 beats by $0.01. Revenue of $4.9B (+16% Y/Y) misses by $0.2B. Shares -15.4% AH. (PR)
- In Asia, Japan -0.6% to 9351.4. Hong Kong -1.2% to 21695. China -0.8% to 2,643.65. India -0.6% to 17871.
- In Europe, at midday, London +0.1%. Paris +0.9%. Frankfurt +0.8%.
- Futures at 7:00: Dow +0.6%. S&P +0.8%. Nasdaq +0.6%. Crude -1.4% to $93.59. Gold -0.15% to $1527.60.
Friday's Economic Calendar
The SA Currents team contributed to this post.
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