Everything u want

Saturday, July 19, 2008

Google Buys Online Ad Business in Russia

Google, whose business has been lagging on the Russian Internet, stepped up its business there with the $140 million purchase of a Cyrillic online advertising business on Friday. The deal also included a cooperation agreement with Rambler, one of Russia’s top search engines, to use Google’s ad placement technology on its site. Google’s managing director for emerging markets, Mohammad Gawat, said the deal showed his company’s commitment to fast-growing advertising markets like Russia. Anna Lepetukhhina, an Internet analyst at Troika Dialog, a Moscow brokerage firm, said Internet ad revenue was growing 30 to 40 percent a year in Russia.

Citigroup Posts $2.5 Billion Loss on Write-Downs

Hobbled by the credit crisis at home, Citigroup has limped through nine months in the red, reporting a $2.5 billion quarterly loss on Friday.

But across the financial company’s global empire, which spans more than 100 countries, similar tremors may be starting. In countries like Mexico, Brazil and India, loans in areas like home mortgages and credit cards are beginning to sour, as they have in the United States.

So far the problems are small. And Citigroup executives, who have spent months trying to turn the company around, say it is too soon to tell how much the problems might spread. The troubles hint at what could be in store for other American companies that rely on earnings from overseas, particularly when times are lean at home.

“We have clearly had some deterioration in credit internationally,” said Gary L. Crittenden, the chief financial officer of Citigroup. “That’s not isolated to Citigroup, that’s a broader question.”

The loss that Citigroup reported on Friday was not as gaping as many investors had feared. Wall Street cheered the results, which only a year ago would have been seen as disastrous.

For the quarter Citigroup lost 54 cents a share, and reported write-downs of $7.2 billion on its investments. On the consumer debt front, the bank also announced $4.4 billion in net credit losses and $2.5 billion to increase credit reserves.

Citigroup’s chief executive, Vikram S. Pandit, characterized the $2.5 billion loss as a sign of progress, compared with last quarter’s loss of $5.1 billion. Mr. Crittenden said revenues were at their strongest ever in several businesses, including prime brokerage and currency trading, and that this June nearly reached the record revenues of June 2007.

After so much bad news from the financial industry, investors took heart from the results. Shares of Citigroup rose $1.38, or about 8 percent, to $19.35. The showing at Citigroup, combined with stronger-than-expected earnings earlier in the week from JPMorgan Chase and Wells Fargo, helped the Standard & Poor’s 500-stock index snap a six-week losing streak. The index rose 21 points, or 1.7 percent, for the week.

“Investors are happy that the write-downs are under control,” said Stuart Plesser, the banking analyst at Standard & Poor’s Equity Research. “That’s what’s driving Citigroup’s price now — their write-downs.”

Citigroup has long prided itself on its global footprint, building out more than half of its retail 8,300 branches in countries other than the United States. The bank’s presence around the world sets it apart from its competitors like Bank of America and Wachovia.

Before the credit problems began, Citigroup was earning nearly 50 percent of its revenues outside North America — an earnings diversification more similar to major packaged goods companies than commercial banks.

Economists say that multinational companies should better withstand the downturn in the United States, because of their foreign revenues.

“It’s really: how much of a break will these earnings provide? And the answer is some, but we don’t know how much yet,” said Peter Cappelli, a professor of management at the Wharton School at the University of Pennsylvania.

Mr. Crittenden said it was too early to tell if there will be substantial downturns in Citigroup’s consumer markets outside the United States.

He pointed out consumer loans that were 90-days past due by region. In Europe and Asia, the percentage of outstanding loans overdue has moved up only slightly. But Latin America has seen its percentage jump from 2.86 percent in the second quarter last year to 3.54 percent in the current second quarter, which was mostly caused by problems in Mexico, he said.

Net credit losses in consumer banking has jumped tenfold in Latin America and 61 percent in Asia, though that movement is on dollar amounts that are small to the bank’s overall holdings.

Traditionally consumer finance problems move from the United States to foreign markets six to nine months later, said Vincent Breitenbach, head of credit research in the Americas for Barclays Capital. David Jiang, a credit research analyst at Barclays, said international lending is something he is watching as he analyzes banks.

“International has not yet shown the same cracks we’ve seen in North America,” Mr. Jiang said. “If we start to see a similar level of deterioration, it’s just another problem the banks have to contend with."

At Citigroup, the global Achilles’ heel seems to be in its credit cards business. The biggest shortfalls are in North America, where during the last year the bank has charged off more than $2 billion of its loans there and reserved more than $1 billion for future loan losses. Those charges have helped push the bank’s net income in the region down by 75 percent.

But credit card income in Europe, the Middle East and Africa fell by 64 percent during that same period, even as revenues have grown. That disparity is caused by large charge-offs and loss reserves set aside for the region on the expectation that more credit card debt will sour there.

While foreign markets are not at the forefront of banking problems, economists have been predicting slower growth in nearly every region of the world.

Standard & Poor’s Equity Research predicts that Europe’s gross domestic product will grow at 1.7 percent this year, down from 2.7 percent last year, and that growth in Latin America will slow to 4.6 percent, from 5.2 percent. Even China and India are predicted to slow. Profit growth tends to track economic growth.

At Citigroup, a global slowdown could affect other parts of its business. Mr. Crittenden said the bank’s earnings in its global wealth management division were hurt in the second-quarter because of the decline in the stock markets in India and China.

Foreign loan-loss reserves and net credit losses at Citigroup are just barely starting to inch upward. Most of the foreign increase in credit cards was in Mexico and Brazil. In consumer banking, the problem was in India, where residential mortgages hit trouble.

Economists said it was too early to see much foreign impact on company earnings.

“The epicenter, if you like, of the problems in the economy is in the U.S. at the moment,” said Paul Sheard, global chief economist at Lehman Brothers. “But we’re looking for a slowdown across the board. While growth is still quite strong in a lot of these economies, they are running into stronger headwinds.”

Freddie chief's jackpot

NEW YORK (Fortune) -- Freddie Mac chief Richard Syron wants to avoid a government bailout for many reasons. A filing the struggling mortgage giant made Friday lists over 10 million of them.

Syron made $10.6 million last year, according to Freddie Mac's latest report with the Securities and Exchange Commission. The company disclosed the information in a filing that clears the way for Freddie (FRE, Fortune 500) to raise $5.5 billion from investors to shore up its balance sheet.

A spokeswoman says the company has no immediate plan to raise capital. But a new slug of investor funds, whenever they come, could go a long way toward easing fears that the company could be headed for a government bailout - and reduce uncertainty about the ramifications of the mortgage crisis for Freddie's execs, employees and investors.

Syron made by far the biggest sum at the Reston, Va., company, pulling down a $1.2 million salary and a $3.45 million cash bonus, in addition to millions more in stock awards and other compensation for a total of $10.6 million.

Using a pay-disclosure measure that the SEC prefers, which treats the value of stock and options differently, Syron's pay for 2007 was $18.3 million, up 24% from a year ago.

Syron is hardly the only executive making out at Freddie. Six other executives or former executives made at least $2 million last year, the filing shows: Finance chief Anthony Piszel, business chief Patricia Cook, technology exec Michael Perlman, multifamily sourcing exec Michael May, former operating chief Eugene McQuade and ex-technology officer Joseph Smialowski.

Freddie spokeswoman Sharon McHale says the company's board sets pay with the help of consultants who review the compensation at similar financial companies.

"The board looks at a number of factors," she says, listing some of the criteria - including market share gains and improved financial disclosure - that are laid out in the filing.

Critics of the company and its larger sibling, Fannie Mae (FNM, Fortune 500), have long called for the so-called government-sponsored enterprises, or GSEs, to scale back their operations in the name of reducing the risk to the taxpayers who are understood to implicitly stand behind the companies' multitrillion-dollar debt obligations. The companies have been able to brush off those calls so far, and indeed they have been expanding their share of the mortgage market amid a historic downturn in the housing market.

But any use of federal funds to support the companies could expose them to much greater oversight. Rep. Barney Frank told The Wall Street Journal that using taxpayer funds could cause Fannie or Freddie to seek government clearance "before it can even pay its water bill for the toilet."

Big pay days under attack

A tougher watchdog could get involved with the companies' executive pay practices. Early last year, Sen. Chuck Hagel questioned Fannie chief Daniel Mudd's $14 million paycheck for 2006, noting that Fannie at the time was still struggling to bring its books up to date. In May, regulators said Fannie had "substantially completed its remediation."

Even shy of a government infusion, the companies could soon face tighter pay oversight. A housing bill recently approved in the Senate would create a more powerful new regulator for the companies, with greater oversight of pay practices than the current regulator, the Office of Federal Housing Enterprise Oversight.

Calls for executive pay to be reined in at Fannie and Freddie have re-emerged since Treasury Secretary Henry Paulson announced last Sunday that he would seek congressional support for a measure that would authorize the Treasury to buy the companies' stock and increase their credit lines.

The possibility of taxpayer support for Fannie and Freddie caused Chris Whalen, who covers the banking industry for the Institional Risk Analytics investment research firm, to say the government should nationalize Fannie and Freddie, wiping out existing shareholders and making explicit the government's backing of the firms' debt.

After that, he wrote in a report this past week, the firms should be "merged and slowly shrunk down to the minimum size required to operate the two pieces of the business that actually support the housing mission."

Paulson has said he wants the companies to retain their current form, so for now there is no prospect of proposals like that coming to fruition.

Still, there is some sense that perhaps top execs are making too much, given the companies' financial ills. Sen. Joe Lieberman, appearing on a morning talk show on MSNBC, was asked how the companies can pay their leaders millions of dollars annually if taxpayers are being asked to support them.

"I don't know that we can pay them like we pay a normal civil servant because they these are big trillion-dollar operations," Lieberman said in his July 16 appearance on the cable channel's "Morning Joe" show. "But we're going to have a right on behalf of the taxpayers to go in there and set some limits on the salaries that executives of these two institutions have. I've looked at them and they're outrageous."

Yahoo proxy may come down to battle of big funds

SAN FRANCISCO (MarketWatch) - It looks like the bar room tete-a-tete in Sun Valley, Idaho last week may have helped one of Yahoo Inc.'s biggest institutional shareholders make up his mind.

Friday's news from Bill Miller, chairman and chief investment officer of Legg Mason, that he intends to support Yahoo (YHOO:

Yahoo! Inc

News, chart, profile, more

Last: 22.45+0.01+0.04%
4:00pm 07/18/2008

Delayed quote data

Obama arrives in Afghanistan

Barack Obama, the US Democratic presidential candidate, has arrived in Afghanistan.

The visit on Saturday marks his second stop on a tour around Europe and the Middle East, which he hopes will boost his foreign policy credentials during his campaign to become the US's first black president.

Obama left the US on Thursday and stopped first in Kuwait, where he visited troops, Robert Gibbs, a senior aide to the Illinois senator, said in a statement.

Obama's visit comes amid an upsurge in fighting between the Taliban, international and Afghan forces.

Two French aid workers were kidnapped in Afghanistan on Friday, Action Against Hunger said in a statement, and a suicide bomber wounded an officer and a child when he detonated his explosives at a police checkpoint in Kandahar on Saturday.

Priorities

Speaking on the plane before it landed in Afghanistan, Obama said: "We have one president at a time so I'm not gonna be travelling to negotiate anything or making promises.

"I am there to listen, but there is no doubt that my core position, which is that we need a timetable for withdrawal, not only to relieve pressure on our military but also to deal with the deteriorating situation in Afghanistan and to put more pressure on the Iraqi government, is now a position that is also held by the Iraqi government."

Obama said that it was time to respect the wishes of Iraq as a sovereign government and start withdrawing troops. A move he said, is in the strategic interests of the US.

Al Jazeera's James Bays, reporting from the capital, Kabul, said Obama's visit is attracting a lot of attention even among ordinary Afghans.

"His visit is cloaked in secrecy ... during his time here he will meet the Afghan president, Hamid Karzai, although there will be no press conference just an opportunity for the two leaders to speak and pose for photographs."

Bays said that if Obama is elected president and takes office in January 2009, then the Afghan elections will be one of his top priorities because Karzai will also be facing elections in the next year.

"Afghanistan is one of Barack Obama's top priorities ... his key note speech on foreign affairs and he spoke for much of that speech about Afghanistan.

"He said he was going to withdraw troops from Iraq in his first year in office, and he was going to send two extra combat brigades to Afghanistan, an extra $1bn each year for this country."

The senator has said that Afghanistan is the central front in the so-called "war on terror," and he is expected to call for more US action to rout the Taliban and al-Qaeda.

Obama is also expected to visit Iraq on his tour ahead of the November election. Also in a surprise visit, Gordon Brown, the British prime minister, touched down in Baghdad, the Iraqi capital, on Saturday.