Daniel Godfrey to head IMA

The Investment Management Association has appointed Daniel Godfrey, former director general of the Association of Investment Companies, as its new chief executive, Financial News has learned.
Godfrey will take over from the UK trade body’s chief executive Richard Saunders at the start of December, although Saunders has agreed to advise the IMA for a further month.

Godfrey was communications director at insurance group Phoenix between November 2009 and February 2012. He chaired HM Treasury’s Personal Finance Educational Group between 2006 and 2010.

Meet the men in charge of bonuses at Deutsche

Michael Dobson, the chief executive of Schroders, was today named as one of the members of Deutsche Bank’s new compensation panel that it has set up to scrutinise pay, as it continues to take a knife to bankers’ remuneration.

   Dobson, an ex-Deutsche Bank banker, will be joined by four others, including the head of the panel Dr Jürgen Hambrecht, former chief executive officer of chemicals giant BASF.

 

   Deutsche first announced that it was setting up the panel in September, when it released a strategic and financial aspiration update under new co-chief executives, Anshu Jain and Jürgen Fitschen.

Credit Suisse enjoys advisory and FICC boost

Credit Suisse’s investment bank was smaller but more lucrative during the third quarter, boosted by stronger performance from its advisory bankers and fixed income traders, giving hope that European firms enjoyed as profitable a summer as their US rivals.

    The Swiss bank, which is the first large universal European bank to report its results, this morning reported that pre-tax profits at its investment bank reached Sfr508m ($544m), up 33% from Sfr383m in the second quarter. In the third quarter last year, it made a loss of Sfr720m before taxes.

 

  The increase in pre-tax profits came despite ongoing efforts to reduce risk weighted assets, which were down 2% quarter-on-quarter. The bank also confirmed it is on track for Sfr3bn in cost cuts in 2012, though operating costs increased marginally quarter-on-quarter.

Havers departs Baird after 10 Years

Simon Havers, former chairman of the British Venture Capital Association, has left his role as head of the European private equity operations at investment bank Baird & Co after more than a decade at the firm.

Havers left late last month and is in the process of setting up a new venture, according to a source close to the matter. Havers could not be reached for comment. A spokesman for Baird confirmed Havers' departure, adding that his position would not be filled. Executives at the bank's European private equity business will now report directly to Gordon Pan, a US-based managing partner of Baird Private Equity.

FN100 Most Influential Women: Hedge Funds

Financial News has published its 2012 list of the most influential women in Europe's financial markets . Here are the profiles of those working in hedge funds.

• Valerie Benard
Head of Europe
Aksia

   Benard joined US hedge fund advisory firm Aksia three years ago to set up its London office. She is now Aksia’s most senior portfolio advisory partner in Europe and leads a team of eight. Over the past 18 months, Aksia has grown its client base in Europe by 50%, notably gaining traction in the public pension fund community. Aksia, which advises more than $40bn in hedge fund allocations, stands out for its bespoke work: it avoids the “buy list” of managers favoured by many of the larger consultants and conducts detailed research specific to each client. Benard previously spent eight years at Blackstone Asset Management.

Nasdaq OMX hit by five-year low in US equity trading

 Fees earned by Nasdaq OMX from its equities business fell year on year by one-third, as a five-year low in trading of US stocks forced the transatlantic exchange operator to turn to other markets for revenues.

The exchange group today reported that net revenues from equities trading fell to $47m in the third quarter of this year, down by 30% from the same period last year, when it made $67m. The drop came on the back of US average daily trading volume at the exchange falling to a five-year low of six billion, which was down 32% from 8.8 billion in the same period year last year.

Advent wins out in eastern European deal tussle

Mid Europa has missed out in the battle to acquire Polish supermarket operator EKO after Advent International announced it had this week acquired 59% of the business.

Advent first bid 4.1 zloty ($1.3) per share for EKO Holding Group in early September while it was in negotiations with the company’s founder Krzysztof Gradecki, who held a majority stake in the company together with his wife.

After hearing of central and eastern European firm Mid Europa’s interest in the business, Advent upped its bid to 4.7 zloty a few weeks later and reached an agreement with Gradecki but Mid Europa came in with a counter offer of 5.5 zloty.

Bernanke's helicopter malfunction

Federal Reserve chairman Ben Bernanke once said central bankers should drop money on beleaguered economies by helicopter, as necessary. But veteran strategist Marc Faber is unimpressed, saying it tends to land in the wrong place.

For now, central bank money drops should continue to push up stock market prices, benefiting distressed assets which have not, as yet, benefited from inflows. Four months ago, southern European bonds and equities fell into that category, and Faber was among the investors to pile in.

CME Europe exchange to target Asia-Pacific market

The CME Group will use its new European exchange as a springboard to the Asian-Pacific markets, with trading hours on the platform extending across the region's trading day, the company's chief operating officer has told Financial News.

   The CME Group is one of a handful of large exchanges that is looking to expand eastwards to benefit from growth in the Asia-Pacific markets amid increasing competition at home.

 

   Speaking to Financial News, Bryan Durkin, chief operating officer of the CME Group, said: "We have spent a lot of time building talent, regional expertise, and infrastructure in Europe and bringing an exchange to the region is a natural extension of those efforts. We see an opportunity to leverage that infrastructure in other regimes and Asia is one of those. Clearing and execution located in London will serve a number of regions, including Asia-Pacific."

Head of specialist sales departs Deutsche Bank

The head of specialist equity sales at the Deutsche Bank, who previously managed one of the largest teams dedicated teams in Europe, has left the bank, Financial News can reveal.

   Audrey Wiggin left last month having spent 11 years at the German bank. She was most recently head of specialist sales within the equities division, running a team of around 30 staff across sector research, midcap stocks and special situation sales.

She was registered as inactive on the Financial Services Authority's register of authorised persons last month. Wiggin could not be reached for comment. Deutsche Bank declined to comment.

A telecoms specialist, Wiggin in 2006 ranked third in the Thomson Reuters Extel rankings for specialist salespeople covering the sector, before taking on a management role. In the most recent survey, the bank had two top-ranked specialist salespeople.

UBS to cut 400 investment banking jobs

UBS is embarking on a new round of job cuts within its investment bank, according to people familiar with the matter, as the Swiss bank grapples with a downturn in business that shows few signs of abating and considers a further restructuring of the division.

UBS will begin notifying employees today of a new round of job cuts totaling roughly 400, the people said.

Additional job losses at the bank may quickly follow as, according to one of the people, there is a "good probability" that when UBS discloses its third quarter results next Tuesday, it will make clear which businesses it intends to focus on in the years to come, and which ones it will de-emphasise.

Wall Street is rethinking commodity trading role

Goldman Sachs has held preliminary internal discussions in the last two years about splitting off its lucrative commodities trading business, according to people briefed on the discussions.

The idea hasn't gained traction and has been tabled, as the New York investment bank is waiting to see how the business fits into the final version of new regulations such as the Volcker rule, which is scheduled to be implemented in coming months. The final rule is expected to ban some types of trading and could hit commodities trading revenue hard, these people said.

But the fact that Goldman has considered a possible restructuring of such a major business shows how dramatically new rules are reshaping the investment banking landscape.

Actuaries back Steve Webb's defined ambitions

The Faculty & Institute of Actuaries, a UK trade body for the profession, has offered qualified support for the pensions minister Steve Webb's idea for retirement plans that would offer their members a partial money-back guarantee, instead of leaving them entirely at the mercy of the markets.

Earlier this year, Webb said one of his priorities was to encourage companies to offer pensions that offer workers some kind of assurance about their retirement income.

He dubbed his proposal "defined ambition", pitching it halfway between modern "defined-contribution" plans where members' pensions depend on the markets, and old-style "defined-benefit" schemes which offer a fully-guaranteed pension often based on workers' final salary.

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'One-stop HFT shop' in European foray

Wedbush Securities, a US investment bank and a major supplier of services to the high-frequency trading community, has made its first major push into Europe by joining the London Stock Exchange, in a sign that the battle to win order flow among HFTs is intensifying.

 

    The bank's London subsidiary, Wedbush Europe, joined the LSE earlier this week, according to exchange filings. It has authority to trade on the LSE's main SETS equities market, and has appointed Dutch firm, Kas Bank, to act as its settlement agent.

 

   The firm joined the Warsaw Stock Exchange earlier this year, but its membership of the LSE, one of the largest European bourses, signals its intent in the region. Commenting in company filings in August, Wedbush's European directors, led by Charles McSwiggan, said the firm was putting "the necessary tools in place in order to commence trading as soon as the conditions are right."

Fitch predicts return of dividend recaps

The controversial boom-era practice of dividend recapitalisation is returning, according to ratings agency Fitch, as private equity firms seek alternative ways of returning money to investors in a difficult exit environment.

A dividend recapitalisation involves buyout firms burdening their portfolio companies with additional debt in order to fund dividends. It was used by a number of private equity firms at the height of the buyout market in 2006 and 2007.

In a note released this week, Fitch said that the combined factors of improved appetite from high-yield bond investors and “selective risk appetite among loan investors” – meaning that they are more willing to provide loans to fund recaps – has created conditions for an increase in dividend recapitalisations. This time around, however, terms are likely to be more conservative than recaps during the boom era, Fitch said.

FN100 Most Influential Women: The Regulators

Financial News has published its 2012 list of the most influential women in Europe's financial markets .Here are the profiles of those at the forefront of the regulatory debate.

• Sharon Bowles
Member of the European Parliament
Chairman of the European Economic and Monetary Affairs Committee, European Parliament

With more than 50 items on the go at any one time and 10 new rules in the final stages of negotiation, Bowles has had her hands full working on everything from OTC derivatives reform to bank capital levels. As chairman of the European Parliamentary Economic and Monetary Affairs Committee, her main focus right now is Basel III. Over the next year, she will be busy ensuring that a banking union in the eurozone does not push the UK out of Europe or split the single market – both issues which she says are crucial to London’s future as an international banking centre for the EU and for the region’s diversity.

Foreign banks say no on US swaps

Two large banks in Asia and Europe said they won't register with US regulators to trade complex derivatives with US-based financial companies, amid controversy over a proposed rule tied to the Dodd-Frank markets overhaul.

   Non-US banks have been complaining for months about regulations that would force banks to register with US regulators if they trade a set amount of swaps, a type of privately negotiated derivative, with US banks or for US clients.

   Singapore's DBS and Sweden's Nordea Bank are apparently the first major banks to declare that they won't register.

Investors warm to European equities

Investors have turned bullish towards European equities for the first time since the 2009 loss of Ireland’s AAA credit rating heralded the onset of the eurozone sovereign debt crisis.

Stimulated by the bond-buying plan initiated in September by Mario Draghi, president of the European Central Bank, investors and fund managers have begun increasing their equity allocations to Europe, a move that may continue a recent rally in European stock market indices.

Andrew Parry, chief executive of Hermes Sourcecap, a European equities fund manager with $2bn under management, said that in the past month his firm had seen new inflows from existing pension fund clients increasing allocations. This is the first time in the firm’s five-year history that its existing clients have added to their investments.

Bats to target index providers amid benchmark debate

Bats Chi-X Europe is in discussions with independent index providers to include the platform’s trading data within their calculations. The development would see volumes on alternative trading venues reflected in some of the industry’s main benchmarks for the first time.

Many of the major equities indices, including the FTSE 100, are owned by exchanges and only incorporate trading data from their owners or other bourses. This means that as much as half of intraday trading in some markets is not reflected in the major national benchmark.

The merger of Bats with Chi-X Europe in November last year created Europe’s largest European platform with 25% of daily market share.

NYSE Euronext puts UK data centre under review

NYSE Euronext, the operator of stock exchanges in Paris, Amsterdam, Brussels and Lisbon, is “strategically and financially” reviewing the operation of its two-year-old, multimillion-pound UK data centre, which covers the area of more than six football pitches, Financial News has learnt.

NYSE has spent around $500m on two new data centres in the US and UK, which, in a single move, put the exchange’s systems business, NYSE Technologies, at the heart of its future strategy.

The group said earlier this year it was hoping to double its technology revenues to $1bn by 2015.
Its UK data centre, in Basildon, Essex – which was valued last December at £120m – houses matching engines for NYSE’s European stock exchanges, its Liffe derivatives market, the alternative platforms Arca Europe and SmartPool, as well as third-party venues.

FN100 Women: On the front line of the regulatory debate

This year's FN100 Women, Financial News' sixth annual editorial pick of the most influential female executives working in European financial markets, is dominated by those negotiating the plethora of new rules governing every single aspect of the industry.

Of the 100 women on the list, a fifth are actively involved in regulatory reform. Four are Members of the European Parliament, three are regulators, six campaign for industry lobby groups, two co-ordinate think tanks and the others represent their firms to policymakers as well as helping their firms digest, respond to and comply with the latest proposals.

Mitsubishi seeds first US alternatives fund

Japan’s giant Mitsubishi Corporation is set to build its first large alternative investment manager in the US with hundreds of millions of dollars targeting shipping, aircraft, railway equipment leasing and commercial real estate through MC Asset Management.

Patrick Curran, president of Stanford, Connecticut-based group, said that while there was no dedicated amount for this initiative, Mitsubishi Corporation had a strong balance sheet and was committed to expanding the business.

Carlyle co-founder points to brighter PE future

Relations between buyout firms and investors "have passed their nadir", according to Carlyle Group co-founder William Conway, with appetite for the asset class, and in particular co-investments, set to increase.

  Speaking at the British Private Equity and Venture Capital Association’s 2012 Summit event in London, Conway said that since the financial crisis the private equity industry had made great strides in improving both transparency and reporting standards, to which investors had responded positively.

Trade of the Week: Wake up and trade the coffee

Coffee prices in New York and London slumped to a five-week low on Wednesday, as higher supplies met with reduced demand from recession-hit European coffee drinkers.

   The price of high-grade Arabica beans on the InterContinental Exchange in New York dipped below $1.60 per pound on Wednesday October 17, down 14% from $1.86 per pound on October 3, while the cost of cheaper Robusta coffee on NYSE Liffe in London stood at $2,010 per tonne, down 10% from $2,200 at the start of October.

UK committee calls for M&A powers for PRA

An influential UK parliamentary body has called on the government to hand the Prudential Regulatory Authority, which is set to replace the Financial Services Authority next year as a key UK financial regulator, an explicit legislative mandate to approve major bank mergers and acquisitions.

The Treasury Committee, which is led by chairman Andrew Tyrie MP, on Friday recommended the government "include an explicit requirement for the Prudential Regulatory Authority to approve major bank acquisitions and mergers in forthcoming legislation”.

25 Years On: Black Monday remembered

On October 19 1987, 25 years ago today, the City of London was hit by the cataclysmic event known as 'Black Monday'. Just days after the 'Great Storm of 1987', when hurricane-force winds battered the South-East, markets were sent into a tailspin by a stock market crash emanating from the Far East after falling stock prices in the U.S. The causes of the crisis are still the subject of debate, but have variously been put down to the overvaluation of stocks, the herd mentality of investors fleeing from catastrophe, program trading, and the hedging strategy known as portfolio insurance. Financial News asks the veterans to recall their memories of the day and its aftermath.

 

 Peter Randall, Chief executive of Equiduct Systems

“I remember it incredibly clearly, because the day before, I got on the plane with my family from London and we flew back to Hong Kong where I was working. When we landed there was a Chinese language newspaper which said that the New York Stock Exchange was down 500 points.

PE backer pulls the plug on Eladian Partners

A fledgling high frequency trading firm, started by two former Citigroup executives, was forced to wind down operations this week after its funding from a major private equity backer was withdrawn, Financial News has learned.

  Eladian Partners, a multi asset electronic trading firm launched by Steve Swanson and Peter Kent - former directors in Citi's US equities business - said yesterday it had decided to close "due to market conditions." Sources have since told Financial News the firm's hand was forced after its funding from the California-based venture backer, Technology Crossover Ventures, was withdrawn. TCV, a prominent backer in the financial services sector, has invested over $8bn to date in various ventures. It took a majority stake in Eladian last year, the people said. It had reviewed the investment in recent weeks after Eladian incurred heavy trading losses.

Greg Coffey to retire

Greg Coffey, the star trader at Louis Bacon's hedge fund firm Moore Capital, is to retire after 20 years in the industry, Financial News can reveal.

  Coffey, who is known for his intense approach to trading, wants to leave the hedge fund industry to re-balance his life, a person familiar with the matter told Financial News. He also wants to spend more time in his native Australia.

  Coffey was not immediately available for comment. Moore Capital declined to comment.

Longstanding partner leaves Brummer

One of seven owners of Brummer & Partners, Sweden’s largest hedge fund manager, has left after 13 years as a portfolio manager at the firm, and stepped down from the board.

   Torbjörn Olofsson, a portfolio manager at Brummer's fixed-income boutique Nektar, had his last day on October 12 and has also stepped down from his post on the board of Brummer, according to a statement published on Brummer’s website.

   Olofsson said in the statement: “I have always thought that you need to quit when you are on top. I, Nektar and all of Brummer & Partners can look back at a relatively long period that has been successful in terms of asset management performance. Now is therefore a good time to leave.”

RAC in £290m recap deal

The Carlyle Group has taken a £290m dividend out of UK roadside assistance group RAC, mirroring the strategy employed by the private equity backers of rival breakdown services company the AA.

   The RAC, which was acquired by Carlyle last June for £1bn, has added a £260m term loan to its debt structure that, along with £30m from the company’s balance sheet, will be used to repay shareholder loans, according to a rating filing from Standard and Poor’s, which affirmed “highly leveraged” RAC’s B+ rating with a “stable outlook”.

   The rating agency said that the remaining shareholder loans would continue to accrue payment-in-kind interest at a rate of 12% per year.

Meet Michael Corbat: The new CEO of Citigroup

The new chief executive of Citigroup cut his teeth in investment banking at the preeminent bond house of the 1980s, Salomon Brothers, but his career in business began while a student at Harvard – where he was also much admired among the university's kitchen staff.

  Meet Michael Corbat: The new CEO of Citigroup
Michael Corbat, previously head of Citi's operations in Europe, the Middle East and Africa, was today announced as the successor to Vikram Pandit, who resigned unexpectedly.

  Corbat has spent his entire career at Citi and its subsidiaries and has worked on mandates including the bankruptcy of Orange County in California and sovereign debt restructurings in Latin America.
According to a 1982 article in the student newspaper the Harvard Crimson, Corbat began his career in business as an entrepreneur while still a student, launching MCI Enterprises, a manual labour firm, while studying economics at Harvard.

Gas market stung by rapid traders

Veteran natural gas trader John Woods has a simple trading strategy around data on US gas stockpiles: stay away.

Woods and other floor traders on the New York Mercantile Exchange used to look forward to the weekly report of gas inventory figures by the US Energy Information Administration, widely considered the best reading of gas supply and demand in the US.

Traders would be glued to their computers before the data's release at 10:30 a.m. on Thursdays, ready to dive into the busiest trading window of the week.

Managers defy the fiscal cliff to buy shares

Asset managers around the world are selling government bonds and investing in equities in anticipation of a strengthening global economy, despite the looming shadow of the US fiscal cliff, shows the latest monthly survey from Bank of America Merrill Lynch.

  Equity allocations have risen significantly since last month, according to the monthly survey of asset managers’ attitudes published by Bank of America Merrill Lynch Global Research. A net 24% of managers are overweight in equities, up from a net 15% in September.

  When the survey asked what managers would sell to fund the purchase of equities, the number one pick – attracting 37% of the responses – was to sell government bonds. This is the first time this question has been asked.

JP Morgan's 12 is a lonely number

Something remarkable happened Friday in the banking sector. No, it wasn't JP Morgan Chase and Wells Fargo kicking off the third quarter earnings season by touting record profits. Or JP Morgan boss James Dimon declaring the US housing market "has turned the corner."

The wondrous event took place deep in JP. Morgan's financial statements. Sandwiched between long numbers telling the story of the bank's gargantuan size, sits a small "12," closely followed by a percentage sign. To its left, the words: "Return on common equity (ROE)."

There, in a statistical nutshell, lies the predicament facing banks around the world: they aren't earning enough to justify their existence.

Almost there

There's an old saying that the stock market climbs a "wall of worry," and that's never been truer than this year, as US market indexes barrelled ahead, brushing aside concerns about economic weakness in Europe, China, and the US.

At its recent high, reached about a week ago, the Dow Jones Industrial Average was up 11% on the year and within 4% of its peak of 14,164.53, reached five years ago, on October 9, 2007.

Powered by Apple, Google, and General Electric, and other giant stocks, the Standard & Poor's 500 was doing even better, with a gain of 16.5% at its high, making it one of the strongest major indexes in the world.

Hedge fund radio star 'Dr Stu' joins Aquila

The presenter of a weekly hedge fund radio show called “The Naked Short Club” has joined German alternatives manager Aquila Capital to help grow its institutional business internationally.

Stuart MacDonald, who most recently worked as a director of investor relations at fund of funds manager Gems Advisors, has joined Aquila as a managing director, according to a statement from the firm.

Since September 2008, MacDonald has hosted a weekly radio show on Resonance 104.4FM, a not-for-profit arts radio station. The show, which is aired live at 9pm on Monday evenings, describes itself as “one hour of loose talk about hedge funds and the state of the world, plus sweet poetry and heady music”. It draws roughly 80,000 listeners who tune in to listen to Dr Stu engage with a lineup of high-profile speakers from the hedge fund industry.

Hintze cautious after 'too much of a good thing'

Michael Hintze, the founder of $11.7bn hedge fund manager CQS, has used his latest letter to investors to reverse the "constructive" view on markets he has held for the last three years.

In the letter, Hintze wrote that he is inclined to be cautious because of the diminishing impact of global monetary stimulus on economic activity and markets, questions over global growth and geopolitical turbulence.

With this in mind, Hintze said that he has positioned some portfolios to take long positions on short-maturity credit, and short positions on longer-dated credit, where there is less visibility. In equities, he has reduced net long exposure and added to certain commodities, notably agricultural commodities.

Nomura restructures investment banking teams

Nomura is making changes to its investment banking teams, creating a “clearing house for cross-border ideas” through a virtual cross-border M&A team, and amalgamating groups, amid a shake-up at the Japanese bank.

The bank will merge the M&A and UK teams under Adrian Fisk, who previously co-headed European M&A with Andrew McNaught. It is understood that McNaught will stay on at the bank in his old role.

The healthcare team is being incorporated into the bank’s consumer and retail team, with the combined operation to be led by Ludovico del Balzo, previously global head of the consumer and retail group. The Nordic and industrials teams will be combined under Mikael Dahl, previously head of Nordic investment banking.

Banks are letting a good crisis go to waste

There was a point during Deutsche Bank’s investor day last month when, in an otherwise lucid presentation, Colin Fan, the new co-head of the bank’s corporate banking and securities division, slipped into fluent bankerspeak: “One of the things that is hard to demonstrate on a two-dimensional piece of paper is the giving-up of optionality, convexity, whatever you want to call it. All of the things in the past we thought would be a good, cheap cost to maintain optionality: gone.”

To translate: what Fan calls “optionality” or “convexity”, you or I would probably call “procrastination” or “stalling”. But he is absolutely right: the time when banks could sit on their hands rather than rolling up their sleeves and re-engineering now defunct business models is surely drawing to a close.

Analysis by Financial News, published last week, shows that banks have barely started the long task of getting their houses in order. Over the three years to the end of June, the balance sheets at a sample of nine large investment banks actually increased by 6% in dollar terms when measured by total assets, while revenues across the industry have slumped by around a third and pre-tax profits by two thirds.

US housing market products forecast to boom

The first securitisation backed by rental income from the US housing market could be on offer to investors within three months.

Private equity firms have spent millions this year buying homes in foreclosure, which they plan to renovate and then wrap the rental income into structured products to be sold to yield-hungry investors.

Kevin Petrasic, partner in the global banking and payments systems practice at law firm Paul Hastings, said: “There are investors with plenty of cash sitting on the sidelines looking for investment opportunities with different levels of risk, and I would not be surprised to see a rental securitisation in the next three to six months.”

Jenkins criticism spurs buyside to enter bank debate

Senior executives from the European investment industry are planning to enter the debate on the future of the banking industry in the wake of criticism from a Bank of England executive that the buyside has sat on the sidelines too long.

The initiative could lead to the creation of a formal discussion forum. Robert Jenkins, the member of the Bank of England’s Financial Policy Committee who last week urged fund managers to join the regulatory debate, has welcomed the move.

Martin Gilbert, chief executive of Aberdeen Asset Management, said: “The banks have good lobbying skills but asset managers have been pretty shy. I would support a forum where we can make our views known to both sides.” Jenkins said: “I welcome Martin Gilbert’s suggestion. I will work with him and like-minded others to facilitate such a forum.”

JP Morgan's third quarter net up 34%

JP Morgan Chase's third-quarter earnings rose 34% as the bank saw revenue rise and its provision for credit losses fall. Results topped Wall Street expectations.

JP Morgan's results kick off the reporting season for US banks, delivering investors the first look at a quarter expected to be stronger than last year's lacklustre results, thanks to revenue from mortgage lending and fixed-income capital markets. Obstacles however continue to abound, including low interest rates and increasing competition for loans.

 

Direct Line shines on trading debut

 Investors in Direct Line, who voiced over-valuation fears ahead of its London listing this week, have seen the insurer deliver the biggest pop for a UK company of its size in over a decade.

Direct Line's £787.5m initial public offering on the London Stock Exchange yesterday was notable for a number of reasons: it was the largest European IPO since Dutch cable firm Ziggo listed in March for $1.2bn; it was the largest London-listed IPO since acquisition vehicle Vallares' $2.1bn float in June 2011; and it was the largest listing of a UK corporate since the £2.4bn IPO of financial group Standard Life in 2006.

Trade of the Week: Winter sets gas investors all aglow

The price of US natural gas spiked sharply this week, after American energy agencies forecast household spending on heating will rise 15% this year to combat a colder winter. The predictions set off a swarm of speculators anxious for a profit and sent hedgers scrambling to cover their exposure.

On Tuesday, the price of natural gas contracts traded on CME Group’s Nymex jumped 4.78% in a matter of hours. Prices for the benchmark Henry Hub natural gas futures for delivery next month rose to an intraday high of $3.51 per million British thermal units in early afternoon trading, from a midday low of $3.35.

A trader buying 1,000 contracts at $3.35 and selling at $3.51, before the rally cooled slightly, could have made a notional gain of $1.6m. A contract is equivalent of 10,000 million British thermal units.

How the EU could spend its Nobel Peace Prize winnings

The European Union would need to win the Nobel Peace Prize for 541,495 years in a row in order to finance its flagship bailout fund with the prize money.

The 27-nation bloc was the unlikely recipient on Friday of the annual gong and the Nkr8m, or €923,368, prize.

The Norwegian Nobel Committee, which awards the prize, picked the EU and its forerunners for having “over six decades contributed to the advancement of peace and reconciliation, democracy and human rights in Europe.”

However, the prize money is a small drop in the ocean when compared to the EU’s €500bn European Stability Mechanism bailout fund.

M&A bankers rue $500m in missed fees

It is not a good time to be a mergers and acquisitions banker as they contend with eurozone volatility, reduced corporate confidence and depressed levels of activity. With the collapse of the BAE Systems-EADS tie-up this week, they now face another loss of mega-fees.

The two defence firms confirmed on Wednesday they were terminating talks over the proposed merger following weeks of speculation and tense negotiations with government stakeholders over the terms of a deal.

The 11 banks advising on the deal, which include Goldman Sachs, Evercore, Gleacher Shacklock, Lazard and Perella Weinberg, stand to forfeit $120m to $150m in fees, according to Thomson Reuters and Freeman Consulting. They will now share an estimated $15m pool.

Fixed income helps JP Morgan move on from Whalegate

A strong third-quarter performance in fixed income trading – which led to a 33% jump in underlying revenues compared to a year ago – has helped JP Morgan move on from what has been a tumultuous period for the US bank.

JP Morgan also said in its third quarter results, which were published today, that its Chief Investment Office had “effectively closed out” positions held from its infamous “London Whale” trade, which came to light in May.

The bank said the CIO had experienced $449m of losses in the third quarter from principal transactions on the portfolio of index credit derivative positions it was left with after transferring a synthetic credit portfolio to JP Morgan's investment bank in July.

Three-quarters of companies 'will need longer to pay off pension deficits'

Three-quarters of UK companies with pension deficits say they will take longer to pay them off than they were planning, thanks to the economic downturn and the Bank of England's policy of quantitative easing, according to analysis by the government's Pensions Regulator.

 

The regulator said earlier this year that it would treat companies with more flexibility over their pensions bills, given the prevailing economic environment. Chief executive Bill Galvin said in April that it was "prepared to tolerate longer recovery plans".

While the authority is at frequent pains to point out it has never insisted companies pay off their deficits in any particular period, for many years it treated a recovery period longer than 10 years as a "trigger" to take a closer look at a firm.

Pimco's Gross buys Italian and Spanish bonds

Bill Gross put money where his mouth is, warming up to Spain and Italy while pulling back from the US.

Gross, manager of the world's biggest bond fund at Pimco, cut holdings of Treasury bonds in September for a third month, bolstered by his worries that the US fiscal woes and highly accommodative monetary policy would erode investors' confidence in the world's go-to safe haven asset.

At the same time, he boosted non-dollar bonds sold by developed nations. The move confirmed his comments in an interview Friday with Dow Jones Newswires that he has bought Spanish and Italian government bonds in recent weeks after staying out of the debt market from troubled euro zone economies since the start of the year.