Financials Weekly Notes – GS, CS, RBS, JPM & MET

July 1st, 2011 by Trefis Team
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Below are some notes published this week from Trefis for those following financials including Goldman Sachs (NYSE:GS), Credit Suisse (NYSE:CS), The RBS Group (NYSE:RBS), JPMorgan Chase (NYSE:JPM).

Goldman Sachs Expands Investment Banking Capabilities in Brazil

Goldman Sachs (NYSE:GS) is looking to boost its workforce in Brazil in an effort to expand its footprint in the emerging markets. [1] The bank is targeting growth in high margin businesses such as convertible debt and the securitization of receivables in the booming investment banking sector in the Latin American nation. Other investment banks such as JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), UBS (NYSE:UBS), Credit Suisse (NYSE:CS) and Citigroup (NYSE:C) also have significant presence in the region.

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OTC Derivatives Trading Regulations Delay to Help Banks Maintain Trading Revenues, Margins

Goldman Sachs (NYSE:GS), JPMorgan (NYSE:JPM), Bank of America (NYSE:BAC), Citigroup (NYSE:C) and Wells Fargo (NYSE:WFC) are the largest players in the Over the Counter (OTC) derivatives market in the United States selling contracts that help corporations hedge risks. [2] The OTC derivatives market that estimates say trades contracts worth $300 trillion in notional value every year has been criticized for being largely unregulated and opaque to outsiders. It is expected that the derivatives market may be put under more scrutiny in the coming years as the Commodities Futures Trading Commission (CFTC) draws up plans to define regulations to standardize practices. [3] The CFTC has however missed it mid July deadline for drafting the regulations and believes that it would need another year to complete the job and more delays are only likely as political opposition to additional regulation is mounting. As the efforts are delayed, banks can breath a sigh of relief for the moment.

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CS Announces Systematic Trading Group for Asset Management Division

Credit Suisse (NYSE:CS) announced the launch of a systematic trading group this week that would offer diversified, liquid trading strategies for its asset management clients. [4] This move by Switzerland’s second largest bank will see it competing with other banks offering asset management services UBS (NYSE:UBS), JPMorgan (NYSE:JPM), Goldman Sachs (NYSE:GS), Citigroup (NYSE:C) and Morgan Stanley (NYSE:MS).

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RBS Dutifully Sheds Assets as Stock Heads to $13.50

The RBS Group (NYSE:RBS) has opened the books of its banking operations in Romania to potential buyers of the business. [5] While the company has declined to comment on this recent development, the sale is expected to complete over the next two months. RBS could end up making more than €100 million ($144 million) from this deal. The 84% state-owned RBS Group has been working on selling off its non-core businesses since the UK government bailed it out during the economic downturn of 2008. It competes with other worldwide banking institutions and financial services groups like Citigroup (NYSE:C), Barclays (NYSE:BCS), Bank of America (NYSE:BAC), UBS (NYSE:UBS) and JPMorgan Chase (NYSE:JPM).

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JPMorgan Headed to $45 as it Expands Prime Brokerage Abroad

Expanding its footprint in the global prime brokerage business, JPMorgan Chase (NYSE:JPM) has launched its complete prime brokerage services for European hedge funds. [6] JPMorgan is the leading investment bank in the world but has lagged behind competitors like Goldman Sachs (NYSE:GS) and Morgan Stanley (NYSE:MS) in the lucrative and fee laden prime brokerage business.

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MetLife Eyes Reverse Mortgage Market as Giants Exit

MetLife (NYSE:MET) seems to be keen on reaching the top spot in the reverse mortgages market. That would justify the company’s efforts to grow soon after two of the largest providers of reverse mortgages – Wells Fargo (NYSE:WFC) and Bank of America (NYSE:BAC) – announced their departure from the market. [7] MetLife is the largest life insurer in the U.S. with total assets of over $700 billion and competes with AIG (NYSE:AIG), The Hartford (NYSE:HIG), Prudential Financial (NYSE:PRU) and New York Life.

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Notes:
  1. Goldman Sachs Targets 20% Brazil Hiring Surge for Complex Financing, LBOs, Bloomberg [↩]
  2. Banks Lobby Against Ban on Derivatives Trading, Dealbook [↩]
  3. Derivatives Watchdog Should Streamline Quest for 51 Rules: View, Bloomberg [↩]
  4. Credit Suisse’s Asset Management Division Launches Systematic Trading Group, PR Newswire). The group will manage $500 million in assets including seed capital from Credit Suisse and funds from the quantitative group operating under the same division. ((Credit Suisse Starts $500 Million Systematic-Trading Group Led by Toikka, Bloomberg [↩]
  5. BNP Paribas, OTP, Funds May Bid for RBS’s Romanian Unit, ZF Says, Bloomberg, Jun 29 2011 [↩]
  6. JPMorgan flexes muscle with European hedge funds, Reuters [↩]
  7. MetLife Pushes Reverse Mortgages as Wells Fargo, BofA Retreat, Bloomberg [↩]