Greece’s Tsipras Will Meet With Cabinet on Eve of Bailout Talks - Mitch Cator's Blog

Greece’s cabinet will huddle with the prime minister on Sunday to map out its strategy for a meeting the next day that will decide the nation’s future in Europe’s currency bloc.

On the agenda at the meeting in Prime Minister Alexis Tsipras’ residence is whether to compromise on election promises in order to avoid a default on its debt.

Months of back and forth with creditors have left banks living day-to-day on European Central Bank funding. Panicked depositors have withdrawn 30 billion euros ($34 billion) since December and 4 billion euros the past week alone. Without a deal at a European Union leaders summit on Monday, Greece faces the specter of capital controls and what U.S. Treasury Secretary Jacob J. Lew said was a “terrible” economic decline.

“Austerity must end,” government spokesman Gabriel Sakellaridis said after Greek negotiators ended a meeting on Saturday. “A different Europe is necessary, a different Europe is possible.”

With markets closed, the weekend gives negotiators some room to lay out a roadmap for what will be a high-stakes week with an emergency summit of EU chiefs on Monday in Brussels. The clock is running down on a June 30 deadline to make payments and work out a new deal amid disagreements on pensions, sales tax and spending targets.

Greek Red Lines

In a sign that Greece may not bend to creditor demands, Minister of State Nikos Pappas said red-lines include no cuts to pension plans and wages, and a comprehensive review of the country’s onerous debt load.

The Frankfurter Allgemeine Sonntagszeitung newspaper said Greece may gain an extension of the current aid program to at least September as well as some funds, provided that Greece agrees to EU Commission proposals. It didn’t cite anyone.

German Chancellor Angela Merkel and her French counterpart, Francois Hollande, spoke by phone on Friday. As leaders of the biggest economies in the 19-nation euro bloc, they’ve presented a united front against Tsipras, who has spent his months in power trying to roll back austerity policies.

It may be getting more difficult for Hollande to stand firm. On Saturday he received an appeal from lawmakers including some from the ruling Socialist Party to end the “financial blackmail” of Greece. The message of France “cannot be a docile reminder of the rules at a time when the house is burning,” the lawmakers said in an open letterpublished on the website of France’s Communist Party.

Tsipras Trip Canceled

With its finances in tatters and banks bleeding deposits at record pace, it’s unclear how long Greece can hold out against the conditions attached to a fresh infusion of rescue loans.

Separately, Greece was given a few more days of financial breathing space from the ECB, which Friday increased again the maximum amount of emergency funding Greek banks can access.

On Monday, the ECB will revisit that emergency funding as deposits continue to flee Greek banks at dizzying rates. About 1.85 billion euros was withdrawn in the last two days alone, according to a person familiar with the matter.

“We are in the midst of great turbulence,” Tsipras said in St. Petersburg. “But we are a nation of seafarers, who know how to deal with storms, and aren’t afraid to sail to distant oceans, to uncharted waters, in search of a safe harbor.”

No Willingness

Greek Finance Minister Yanis Varoufakis, in an opinion piece published Saturday by The Irish Times, blamed his European counterparts for showing no willingness Thursday to consider his “well thought-out” proposals.

“Regrettably, my presentation was met with deafening silence,” Varoufakis wrote.

In an interview published in Brussels-based l’Echo newspaper, Varoufakis said he doesn’t want Greece to abandon the euro and is optimistic differences will be overcome. He also warned that the ruling Syriza party would be replaced by neo-Nazis if Greece ends up defaulting and leaving the euro.

Tsipras on Saturday canceled a planned trip to Strasbourg on June 23. No reason was given.

“We need to get rid of any illusions that there will be a magic solution at the leaders’ level,” European Union President Donald Tusk said on Friday. “We are close to the point where the Greek government will have to choose between accepting what I believe is a good offer of continued support or to head towards default.”

Forex-Rigging Fines Could Hit $41 Billion Globally: Citi

The cost for banks to settle probes into allegations traders rigged foreign-exchange benchmarks could hit as much as $41 billion, Citigroup Inc. (C) analysts said.

Deutsche Bank AG (DBK) is seen as probably the “most impacted” with a fine of as much as 5.1 billion euros ($6.5 billion), Citigroup analysts led by Kinner Lakhani said yesterday, estimating the Frankfurt-based bank’s settlements could reach 10 percent of its tangible book value, or its assets’ worth.

Using similar calculations, Barclays Plc (BARC) could face as much as 3 billion pounds ($4.8 billion) in fines and UBS AG (UBSN) penalties of 4.3 billion Swiss francs ($4.6 billion), they wrote in a note first sent to clients on Oct. 3.

Authorities around the world are scrutinizing allegations that dealers traded ahead of their clients and colluded to rig currency benchmarks. Regulators in the U.K. and U.S. could reach settlements with some banks as soon as next month, and prosecutors at the U.S. Department of Justice plans to charge one by the end of the year, people with knowledge of the matter have said.

Spokesmen for Deutsche Bank, Barclays and UBS declined to comment on the Citigroup estimates.

The Citigroup analysts made their calculations using a Sept. 26 Reuters report that the U.K. Financial Conduct Authority settlements could include fines totaling about 1.8 billion pounds. They derived their estimates for how high fines could go in other investigations from that baseline, using banks’ settlements in the London interbank offered rate manipulation cases as a guide.

Photographer: Krisztian Bocsi/Bloomberg

Deutsche Bank AG is seen as probably the “most impacted” with a fine of as much as 5.1...Read More

“Extrapolating European and, more importantly, U.S. penalties from a previous global settlement suggests to us a total potential global settlement on this key issue,” they said in the note.

Cooperation Rewards

U.K. authorities will probably account about $6.7 billion of fines across all banks, according to the Citigroup analysts. Other European investigations will account for $6.5 billion. Penalties in the U.S. cases could be about four times greater, hitting $28.2 billion.

The Citigroup analysts didn’t take into account the possible effect of banks’ collaboration with investigators. That can have a big impact on the size of the fines, lowering and even wiping out a penalty in some cases.

UBS and Barclays saw $4.3 billion worth of antitrust fines waived by European Union authorities in December in exchange for their early and full cooperation. Six others were fined 1.7 billion euros in that case, which involved rigging euro and yen interest rate derivatives.

UBS has sought leniency in exchange for handing over evidence of misconduct to U.S. antitrust investigators in the foreign-exchange probes, and was also the first to step forward to cooperate with the EU, people with knowledge of the matter have said.

To contact the reporter on this story: Richard Partington in London at rpartington@bloomberg.net

To contact the editors responsible for this story: Simone Meier at smeier@bloomberg.net Heather Smith, Edward Evans

JPMorgan posts profit as trading picks up and legal costs ease

(Reuters) - JPMorgan Chase & Co (JPM.N) reported a third-quarter profit as the biggest U.S. bank boosted revenue from trading and investment banking, and moved past the huge legal claims that pushed it into a rare loss in the same quarter last year.

The bank, confirming figures leaked earlier on an investment website, said on Tuesday it recorded net income of $5.6 billion, or $1.36 per share, for the three months ended Sept. 30, compared with a loss of $380 million a year earlier.

Analysts had expected earnings of $1.38 per share, according to Thomson Reuters I/B/E/S, and JPMorgan's shares were down 1.7 percent at $57.19 in premarket trading.

"The Corporate & Investment Bank saw strong performance in fees, maintaining a #1 position in global (investment banking) fees year to date, with particular strength in equity capital markets," Chief Executive Jamie Dimon said in a statement.

"In Markets, we saw increased activity and better performance overall, particularly in currencies and emerging markets," he said.

The quarterly report was the bank's first since Dimon, 58, underwent radiation and chemotheraphy treatment for throat cancer. The illness has raised questions about who might succeed him if he has to step down.

Dimon said on a conference call with reporters that his health prognosis was "excellent."

"I feel good and I'm happy the treatments are over."

The bank was hit last year by an after-tax expense of $7.2 billion to settle government allegations of wrongdoing related to mortgage instruments before the financial crisis. The latest results included a legal expense of $1 billion after tax.

However, the bank said it expected total adjusted expenses for 2014 to be above the $58 billion, excluding legal costs, that it had forecast. Costs totaled $59 billion in 2013.

Revenue from fixed-income, currency and commodity trading rose 2.1 percent to $3.51 billion in the latest quarter compared with a year earlier, and was also slightly higher than in the preceding quarter.

Market activity picked up in September, largely due to the European Central Bank's efforts to stimulate growth and a batch of data suggesting the U.S. economy was strengthening.

The surprise exit of superstar Bill Gross from bond trading giant Pimco also spurred bond market activity in late-September.

ANOTHER TECHNICAL EMBARRASSMENT

"Growth is modest. The headline numbers have come out slightly below expectations, but the model of stability is there, and that's ultimately what you want from a bank," said Simon Maughan, head of research at financial analysis firm OTAS Technologies in London.

The bank did not provide a figure for costs related to an attack on it computers that was discovered in August and exposed the names and contact information of some 76 million households and seven million small businesses.

JPMorgan suffered another technical embarrassment on Tuesday when its results appeared on website shareholder.com hours ahead of their scheduled release time.

Bank spokesman Joe Evangelisti acknowledged that there had been an "operational error" at shareholder.com, a Nasdaq OMX-owned website that hosts investor relations information for the bank, but offered no further explanation.

The bank's total investment banking revenue rose 2 percent to $1.54 billion, driven by higher advisory fees. But net income from mortgage banking fell 38 percent $439 million.

Mortgage lending by U.S. banks has been shrinking as fewer homeowners refinance. JPMorgan has also been backing away from making home loans to less creditworthy borrowers because of doubts about its ability to recover money in foreclosures.

JPMorgan was the first of three big U.S. banks reporting on Tuesday.

Citigroup Inc (C.N), the No. 3 bank by assets, reported a 13 percent rise in adjusted net profit.

Wells Fargo & Co (WFC.N), ranked No. 4, reported a 1.7 percent increase in net earnings.

Bank of America Corp (BAC.N), the second-biggest U.S. bank, will report on Wednesday.

(Additional reporting by Steve Slater in London; Editing by Ted Kerr)