Wall Street News
GSK: China execs appear to have broken law. GlaxoSmithKline (GSK) has officially admitted that senior executives in China "appear to have acted outside of our processes and controls, which breaches Chinese law." The company intends to reform its operations in the country and lower drug prices there. Britain's Serious Fraud Office is reportedly conducting a preliminary review and could impose its own sanctions, as could the U.S. Justice Department. GSK's shares were -0.3% premarket.
SAP co-CEO Jim Hagemann Snabe resigns. SAP (SAP) co-CEO Jim Hagemann Snabe plans to step down in May next year, leaving American Bill McDermott in sole charge. Snabe will join SAP's supervisory board. Industry watcher Ray Wang wouldn't be surprised if the company appoints another co-CEO to replace Snabe, possibly Vishal Sikka, the board member responsible for technology and innovation. Sikka would be "a good counterweight to Bill McDermott's sales and business acumen," says Wang.
Top Stock News
Vivendi eyes $3B Activision dividend. Vivendi (VIVEF.PK) is reportedly expected to discuss plans at a board meeting today for Activision Blizzard (ATVI) to pay a special dividend of over $3B. With a 60% holding in the video-games company, Vivendi would receive $2B, although Activision would have to raise debt to pay for the dividend. The money, along with the proceeds from a possible $5.5B sale of Maroc Telecom, would allow Vivendi to cut its own €13.19B debt.
UBS takes 865M franc charge on Q2 results. UBS's (UBS) Q2 preliminary net profit jumped 62.35% to 690M francs ($734.36M) and beat consensus of 558M francs, although the Swiss bank is taking a charge of 865M francs on litigation, impairments and other provisions. The charge includes a settlement with the U.S.'s Federal Housing Finance Agency in a lawsuit over soured mortgage investments, the full cost of which is still to be authorized. Shares were +4.5% premarket.
Deutsche Bank to slash balance sheet by 20%. Deutsche Bank (DB) reportedly plans to cut its balance sheet by 20% over the next 2 1/2 years in an effort to bring its equity to assets ratio in line with the 3% target mandated under European regulations. The bank may also issue up to €6B in convertible bonds upon receiving more information from Germany's bank regulator about how the hybrid equity capital will be treated.
JPMorgan nears $410M FERC settlement over power manipulation. JPMorgan (JPM) is reportedly close to reaching a $410M deal with the Federal Energy Regulatory Commission to settle accusations that the bank manipulated energy markets in California and the Midwest. JPMorgan will also forgo $200M in unpaid claims from electricity buyers in California. However, JPM staff are set to escape sanctions. The settlement would follow FERC levying a fine of $435M on Barclays, which is fighting the penalty, for similar sins.
Eurozone banking system massively oversized. At €33T, the eurozone banking system's assets are worth 3 1/2 times the bloc's GDP, RBS notes, adding that the sector needs to shrink its collective balance sheet by €2.7T over the next three years for the situation to be "sustainable." Otherwise, governments may be unable to support the industry in a crisis. In contrast, the U.S. sector is about the same size as the broad economy.
Philips beats expectations as net profit climbs 10.8%. Philips (PHG) Q2 earnings topped forecasts as the Dutch company continued to reap the fruits of its €1.1B savings and restructuring program. Net profit climbed 10.8% to €317M, while revenue rose 3% to €5.65B on a comparable basis, with the company enjoying growth across its businesses. Philips is concerned about "economic uncertainties around the world" but is on track to achieve full-year targets. Shares rose 3.7% premarket.
Facebook attracts 100M users for light feature-phone app. Facebook (FB) has gained over 100M feature-phone users, mostly in emerging markets, in just two years by offering a stripped-down version of its mobile app, which works better than the heavier program in markets where data speeds are slow. The challenge now is to make money from these users whether it be via ads or promotional deals with other companies such as Nokia (NOK) and India's Bharti Airtel.
Netflix earnings seen rising. Netflix's (NFLX) Q2 results are due out after the bell, with analysts expecting that EPS jumped to $0.40 from $0.11 a year ago, while revenue climbed 20.6% to $1.07B. With a price-to-earnings multiple of over 600 times and with shares "trading at over 100 times trailing 12 months EBITDA, Netflix is expensive by any traditional measure," says SA author Michael Blair. "Book value of about $15 a share provides not much in the way of tangible asset value to support the share price."
Top Economic & Other News
Portugal's president backs government. Portuguese President Anibal Cavaco Silva yesterday ruled out snap elections, saying the coalition government led by Prime Minister Pedro Passos Coelho will rule until its term ends in 2015. Silva's announcement came despite Portugal's three main political parties failing to reach a "national salvation" deal due to disagreements about implementing Troika-imposed austerity. Yields on the government's 10-year bonds were -45 bps to 6.385% at the time of writing, while shares were +2.3%.
GS activities drive up aluminum prices - NYT. An "industrial dance...choreographed by Goldman" and others has cost consumers $5B or more over three years by driving up the premium on aluminum in the spot market, an NYT investigation finds. Since Goldman bought Metro International Trade Services in 2010, warehouse customers' wait for deliveries has gone from six weeks to 16 months. Goldman allegedly encourages clients to renew aluminum leases and then shift the metal from one warehouse to another to comply with regulations that require 3,000 tons to be shipped each day.