US sells Citi stake for profit

The last of the US Treasury’s shares of Citigroup Inc sold at $10.5 billion. This means taxpayers will reap a profit of $12 billion on their $45 billion cash investment in Citigroup. It also allows the bank to shake its reputation as a ward of the state.

James Angel, a finance professor at Georgetown University said: “It signals the company has been fully privatized and that their parole is over.”

Last year, the Treasury intended to sell off their 7.7 billion shares steadily over the course of six to 12 months, but had only sold 4.4 billion by October. The results of the November elections seemed to express discontent with government involvement in private business. As a result, the Treasury has increased its speed in selling off its 61% stake in General Motors.

The government still holds $3 billion in Citigroup stock.

Problem bank list grows

The government’s list of troubled banks hit its highest level since 1993 during the second quarter, although the pace of growth continued to slow. The number of banks at risk of failing rose by 53 to 829, the Federal Deposit Insurance Corp. said. That increase marks the smallest rise since the first quarter of 2009.

While some choose to look at the optimistically, let’s look at it realistically. The number still increased. If we want to be optimistic, let’s wait until the number is not growing at all. After that, we can start hoping for a decline.

The number is almost twice the 415 banks on the FDIC’s watch list a year ago. On average, 13% of banks on the FDIC’s problem list have been seized and shuttered by regulators.

So far this year, 118 banks have failed, with 45 closings during the last quarter.

Banks and institutions insure by the FDIC earned approximately $21.6 billion during the quarter, the highest in three years.

Intel will buy Infineon wireless for $1.4 billion

Intel will buy German chipmaker Infineon’s wireless unit for $1.4 billion, enabling the U.S. chipmaker to boost its presence in the smartphone market The transaction should close in the first quarter of 2011. The mobile unit will remain as a standalone business.

This is the second major deal for Intel within two weeks after the company announced its $7.7 billion offer for McAfee Inc on Aug 19, its largest acquisition, bolstering the appeal of its chips as it tries to expand further into the mobile market.

Intel’s Atom mobile chips took the low-cost, no-frills netbook market by storm but are rarely found in smartphones where other chipmakers dominate.

“Infineon would make Intel an instant heavyweight (in the mobile space) and buy them three, four years in R&D,” IDC analyst Flint Pulskamp has said.

Analysts caution that while an acquisition such as Infineon’s mobile chip unit is a step in the right direction it will take time to produce results.

Rivals based on UK-listed ARM’s chip design continue to grab market share.

Infineon shares fell 1.4 percent to 4.54 euros in Frankfurt, widening losses they posted on Friday after Intel warned its third-quarter revenue would fall short of its own expectations due to weak consumer demand on personal computers.

Intel shares closed largely flat at Friday’s market close in New York at $18.37.

And, more good news: their logos look pretty similar, so no need to really change much.

Dipping into the 401(k)

Withdrawals from 401(k) retirement saving plans saw their biggest spike in at least five years, Fidelity Investments said on Friday, in the latest sign of hardship amid a dismal economy.

Fidelity reported that 62,000 people made hardship withdrawals from their 401(k) workplace plans during the second quarter. That’s up from 45,000 participants during the prior quarter, a 37% increase. That means that 2.2% of Fidelity participants took a hardship withdrawal in the second quarter, compared to 2% in the same period last year.

That means that 2.2% of Fidelity customers took a hardship withdrawal in the second quarter, compared to 2% in the same period last year.

Fidelity also said that 11% of participants took out loans from their 401(k) over the past 12 months, an increase of two percentage points from the prior year. The average loan amount was $8,650 at the end of the second quarter.

Fidelity said the top reasons people took loans and made withdrawals were to prevent foreclosure or eviction, pay for college, or purchase a home.

“The current economy has forced some workers to borrow from their 401(k) accounts in order to pay for critical living expenses, ultimately jeopardizing their future retirement,” said James MacDonald, president of workplace investing for Fidelity Investments.

GM to list on NYSE, TSX

Now that GM is turning a profit, it plans a triumphant return to the New York Stock Exchange and Toronto Stock Exchange after its initial public offering.

The IPO, intended to repay a portion of the automaker’s government bailout, has been dubbed “Project Dawn,” said the source, who declined to be named because preparations for the IPO remain private.

Before its 2009 bankruptcy, GM shares traded on the New York Stock exchange, and its return had been widely expected as the automaker begins to distance itself from its government-led restructuring and attracts private investors. Adding a stock listing in Toronto would underscore the role that the governments of Canada and Ontario played as junior partners to the U.S. Treasury in keeping GM from liquidation in bankruptcy.

The number of shares to be sold by the U.S. government, the governments of Canada and Ontario, the United Auto Workers union healthcare trust and other shareholders has not been determined. GM is not expected to issue new common stock in the IPO but plans to sell about $3 billion in mandatory convertible securities that convert into shares in the future

Dollar waves at 15-year low, but departs quickly

The dollar neared a 15-year low against the yen on Wednesday on fears the Federal Reserve could embrace more monetary easing to jolt a faltering recovery but it recouped its losses on better-than-expected U.S. jobs data.

Data showing U.S. private employers added more jobs than expected in July helped the dollar recover lost ground against the yen and also slowed recent gains in the euro, which hit a three-month high on Tuesday.

Private employers added 42,000 jobs in July, compared with a revised gain of 19,000 in June, the report by a payrolls processor ADP Employer Services showed on Wednesday.

The rise in hiring was slightly higher than an estimate from economists surveyed by Reuters for a gain of 40,000 private-sector jobs. The June ADP figure originally was reported as a gain of 13,000 jobs.

While above market expectations the gains still show the economy has not gained the job-creating momentum to pull the unemployment rate down from above nine percent.

Employment levels are considered key to a pickup in consumer spending and to boosting overall U.S. economic growth which has shown signs of weakness in recent months. Data last Friday showed U.S. economic growth slowed in the second quarter of this year.

Economists sometimes use the ADP report to narrow down their estimates for the U.S. Labor Department’s payrolls numbers due Friday, but it is not always accurate in predicting the outcome.

Exxon profits higher than expected

Exxon Mobil Corp., the world’s largest public energy company reported net income of $7.56 billion, or $1.60 a share, in the second quarter, up 91% from $3.95 billion, or 81 cents a share, in the same period in 2009.

Analysts were expecting earnings of $1.46 a share, according to a survey by Thomson Financial.

The results are linked to improved refining margins, an increase in output, and strong performance in the company’s chemicals business according to Exxon’s CEO.

The ongoing rebound in oil prices helped boost profits in Exxon’s oil production and exploration unit, where earnings rose $1.5 billion to $5.34 billion in the quarter. Oil prices averaged $78 a barrel in the quarter, up from $60 a barrel in the same period last year.

The results included a slight impact from Exxon’s recent purchase of XTO Energy, a natural gas company. The $36 billion deal closed on June 25.

Finance Reform 2010

The other day, I searched the Internet for a PDF file of the Finance Reform Bill that passed just this week. Thinking I would find a moderately sized document, I would print out a few pages and highlight some key concepts that people would be interested in.

The document was 1,336 pages long.

I will do my best to slog through it over the next week or two, so stay tuned to the Biz Blog to get your finance reform highlights.

Morgan Stanley turns profit

Morgan Stanley saw a stronger profit than expected in three months. The bank reported a $1.4 billion profit against the $138 million loss last year. Shares are up 2.7%. The results represent a significant victory for the firm. Morgan Stanley has reportedly been bulking up the trading division this year, adding several hundred more employees.

On the other hand, Goldman Sachs disappointed investors after reporting a sharp fall in profits after being hit by the UK’s bonus tax, a US fine and poor trading. Bank of America also seems to be struggling.

Morgan Stanley said employee compensation for the quarter – which included the bonus pool – was $3.9 billion. But it said it had set aside $361 million to cover the cost of a one-off tax on bonuses paid to UK employees.

Meanwhile, another Wall Street stalwart, Wells Fargo, reported its quarterly net profit fell slightly to $3.1bn from $3.2bn a year earlier.

Aon Corp buys Hewitt

Aon Corp, the world’s largest insurance brokerage, will acquire human resource service company Hewitt Associates Inc for $4.9 billion in cash and stock. Aon hopes to beef up its consulting business.

Aon’s offer of $50 per share was 41% more than the Hewitt’s closing stock price on Friday.

The deal will help Aon get a firm foothold in human resource and benefits outsourcing and take on rival insurance broker Marsh and McLennan’s MNC.N Mercer unit.

Hewitt will be integrated into Aon’s existing consulting and outsourcing unit.

Russ Fradin, chairman and chief executive officer of Hewitt, will head Aon Hewitt.

Aon expects the deal to add to 2011 and 2012 earnings and generate about $355 million in annual cost savings in 2013