Goldman Sachs more than doubled its first-quarter profits and announced plans to raise its dividend Tuesday.
The strong results masked other problems, including a 16 percent decline in revenue. To make up for that, and to propel earnings higher, Goldman turned to cost-cutting.
The storied investment bank slashed 3,000 workers over the year, or about 8 percent of its work force. It cut back on salaries, trimmed occupancy costs and paid less in brokerage fees, cutting total expenses by 14 percent.
Revenue from financial advising, where the bank advises big companies and investors on mergers and acquisitions, was one of the few areas to record a revenue gain, 37 percent.
Revenue from underwriting stock and bond sales fell 27 percent. Revenue from trading fell 14 percent, hurt by lower fees and revenue from the division that trades bonds, currencies and commodities. Total revenue fell to $9.9 billion from $11.9 billion, though that beat the $9.4 billion that analysts polled by FactSet had been expecting.
Goldman Sachs said its net income available to common shareholders rose to $2.1 billion, or $3.92 per share. That was a jump of about 128 percent from $908 million, or $1.56 per share, a year ago. The per-share earnings also beat expectations of analysts, who had been predicting $3.52.
The bank also announced it would raise its quarterly shareholder dividend to 46 cents per share from 35 cents. Though the bank didn’t say so, that’s a particular sign of strength in the current market, because it’s also a reminder that Goldman, unlike some of its peers, got permission to do so after passing the government’s most recent round of stress tests.
CEO Lloyd Blankfeink called the quarter a “solid performance.” In a prepared statement, he noted that “client activity remains relatively low in certain areas,” but said that “our mix of businesses gives the firm significant room for revenue growth as economic and market conditions continue to improve.”
For decades, Goldman has been known for beating its Wall Street competitors and churning out executives who go on to high leadership positions.
But the past few years have left it bruised. Last fall, it recorded a quarterly loss, only its second since going public in 1999. In 2010 and 2011, its net income fell year-over-year in six of the eight quarters.
Investors are trying to piece together whether the troubles are a short-term annoyance or a sign of deep-rooted problems. They wonder if the bank needs a new game plan.
Like the rest of the banking industry, Goldman has to figure out how to navigate a world of stricter government controls that will dry up some of its key revenue streams. Goldman has made big profits trading for its own account, especially when markets are volatile. But regulations taking effect this year will reduce Goldman’s ability to make those trades.
Unlike much of the banking industry, Goldman doesn’t have a large consumer banking arm to fall back on when trading and investment banking get bumpy. Its clients are largely hedge funds and multinational corporations that need to hedge their bets on foreign currencies, fluctuating interest rates and commodities.
Return on equity was about 12 percent, in line with a year ago. That was a big change from 38 percent five years ago, before the global economic meltdown.
Goldman also has public-relations problems to worry about. In the era of Occupy Wall Street, Goldman has been the target for much of the vitriol of people who blame the financial crisis on reckless practices in the banking industry. Last month, the vitriol came to a head when a mid-level executive resigned via a blistering editorial in the New York Times, where he accused the bank of losing its “moral fiber” and caring only about its own profits rather than its clients’.
The accusations are still swirling. Last week, the bank agreed to pay $22 million to settle regulators’ charges that Goldman analysts shared confidential research with favored clients. In the first quarter, the bank set aside $59 million for litigation and regulatory proceedings.
Goldman Sachs’ stock fell slightly in pre-market trading, down 73 cents to $117.
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Bank of England Chief Economist Spencer Dale said U.K. inflation may not slow as fast this year as the central bank has forecast as tensions in the Middle East push up oil prices.
The Monetary Policy Committee
ST. LOUIS • A federal grand jury has indicted a former high ranking executive of a St. Louis area medical practice on charges that he embezzled millions of dollars and also broke the nation’s “stolen valor” law by posing as a war hero.
Dunard Morris, 48, the former chief executive of Chesterfield-based Metropolitan Urological Specialists PC, was indicted late Wednesday on multiple counts of mail fraud and wire fraud as well as violations of a federal statute that makes it a crime to falsely represent oneself as having received a U.S. military decoration or medal.
The indictment, which was made public this morning, says Morris “embezzled millions of dollars and concealed the embezzlement through a series of lies, misrepresentations and deceits to the doctor-shareholders” of the business, according to a statement from the U.S. attorney’s office.
Morris increased his salary without authorization and got the company “to pay him hundreds of thousands of dollars in unauthorized, undisclosed bonuses and reimbursements,” the indictment says. He used the money for expensive jewelry, cars, guns, designer clothes, wine and travel, according to federal authorities.
Morris told doctors he was a decorated Marine veteran and winner of the Navy Cross medal for extraordinary heroism, the indictment says. He didn’t receive that honor, and was in reality discharged from the military for misconduct “under other than honorable conditions,” according to the indictment.
The indictment caps an investigation by federal authorities into potentially millions of missing dollars from the lucrative urology firm.
Morris was terminated by Metropolitan’s board of directors in mid-September after suspicions arose about his management practices, including the delayed payment of federal and state taxes, and the possibility that some funds may have been diverted from bank loans to the medical practice.
In recent years, Metropolitan and its property affiliate have obtained bank loans and lines of credit totaling more than $10 million. The firm’s board of directors approved various projects, including the construction of a new medical office building on Big Bend Boulevard in Crestwood, the purchase of a linear accelerator for radiation treatments and the build-out and remodeling of other facilities.
According to his professional resume, Morris served in the Marines from 1980 to 1984, and also from 1990 to 1992. He lists his rank as E-5 (a non-commissioned officer’s pay grade), and claims to have served in the 3rd Reconnaissance Battalion of the 3rd Marine Division, and the Detached Marine Expeditionary Unit Fleet Marine Force.
The Stolen Valor Act of 2005, signed by former President George W. Bush, broadened the provisions of a previous federal statute that prohibits the unauthorized sale, manufacture or wear of military decorations. If convicted on this count alone, Morris could face imprisonment for up to one year and a fine up to $100,000, according to federal authorities.
The mail and wire fraud charges carry up to 20 years in prison and fines of up to $250,000 if Morris is convicted.
Morris worked for Metropolitan and one of its predecessor companies in the St. Louis area for the last decade. Metropolitan, which has about a dozen physicians on its staff, operates a sexual health clinic and offers surgical services as well as radiation treatments for prostate cancer. The firm has an imaging center, a laboratory and doctors’ offices in Creve Coeur, Florissant and Chesterfield, including offices on the campuses of Mercy Hospital St. Louis and St. Luke’s Hospital.
In 2010 and 2011, the company had cash flow problems, including the buildup of about $1.3 million in delinquent federal, state and local taxes, interest and fees, St. Louis County records show.
On Sept. 16, 2011, the Internal Revenue Service filed an $855,291 tax lien on all property belonging to medical practice as well as all of its property rights, federal records show, because the firm fell behind on its quarterly payments of money withheld from its employee’s paychecks.
Also in 2011, the Missouri Department of Revenue placed three tax liens on the firm totaling $154,103 involving overdue withholding taxes, state records show. And the company’s property affiliate — Metropolitan Urological Properties LLC — owed more than $338,000 in delinquent property taxes, interest and penalties to state and local tax authorities on two of its parcels in St. Louis County.
But in recent months, the medical firm and its property affiliate have paid their tax obligations.
The medical practice also maintains that Morris subleased a $5,475-a-month luxury apartment using company funds without approval of the firm’s board of directors. According to the rental agreement, Morris leased the apartment at the Mansions on the Plaza complex at 8300 Delmar Boulevard in March 2011.
Metropolitan’s new interim chief executive, Bob Lawson, and several of Metropolitan’s doctors have not returned calls seeking comment.
The medical firm’s attorney, Mayer Klein of St. Louis, said the firm is current on all of its bank loan obligations and that the new management is making sure that the firm’s bills are being paid on time.
Robert Patrick of the Post-Dispatch contributed to this report.
Luxembourg Prime Minister Jean- Claude Juncker said he
Greek riot police have fired tear gas at hundreds of anti-austerity protesters who tried to break a cordon outside Parliament.
No arrests or injuries were reported after Tuesday’s clashes, during a demonstration by Greece’s two biggest labor unions against new harsh cutbacks demanded to avoid the country’s looming bankruptcy.
Police said up to 8,000 people took part in the protest outside Parliament. Another 6,000 joined in a separate, peaceful demonstration organized by a Communist union.
Heads of the three parties backing Greece’s interim government will confer with Prime Minister Lucas Papademos later Tuesday on new income cuts and job losses demanded by the country’s bailout creditors.
THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP’s earlier story is below.
ATHENS, Greece (AP) _ Greek party leaders on Tuesday will seek a long-delayed agreement on harsh cutbacks demanded to avoid looming bankruptcy, amid intense pressure from its bailout creditors to reach a deal, a general strike disrupting public services and thousands of protesters taking to the streets of Athens.
Heads of the three parties backing the interim government will confer with Prime Minister Lucas Papademos on new income cuts and job losses, which Greece’s eurozone partners and the International Monetary Fund are demanding to keep the country’s vital rescue loans flowing.
A general strike against the impending cutbacks stopped train and ferry services nationwide, while many schools and banks were closed and state hospitals worked on skeleton staff.
Police said up to 14,000 people took part in two peaceful anti-austerity demonstrations in Athens. The separate marches were to converge on central Syntagma Square, outside Parliament, which has been the focus of demonstrations over the past two years of economic pain.
On Monday, Prime Minister Lucas Papademos’ government caved in to demands to cut civil service jobs, announcing 15,000 positions would go this year, out of a total 750,000. The decision breaks a major taboo, as state jobs had been protected for more than a century to prevent political purges by governments seeking to appoint their supporters.
Athens must placate its creditors to clinch a euro130 billion ($170 billion) bailout deal from the eurozone and the IMF and avoid a March default on its bond repayments.
Among the measures the EU and IMF are pressing Greece for is a cut in the euro750 ($979) minimum wage to help boost the country’s competitiveness. This reduction would have a knock-on effect in the private sector _ because private companies also base their salaries on the minimum wage _ and even unemployment benefits. Unions and employers’ federations alike have deplored the measure as unfair and unnecessary.
“It is clear that there is a lot of pressure being put on the country. A lot of pressure is being placed on the Greek people,” Finance Minister Evangelos Venizelos said during a break in talks with EU-IMF debt inspectors late Monday.
He called on coalition parties to work more closely together.
“To save Greece … will involve a huge social cost and sacrifices,” Venizelos said. “On the other hand, if the negotiations fail, bankruptcy will lead to even greater sacrifices.”
“No one is as strong as Hercules on his own to face the Lernaean Hydra,” a swamp monster in Greek mythology, he said. “We must all, together, fight this battle, without petty party motives and slick moves.”
A disorderly bankruptcy by Greece would likely lead to its exit from the eurozone, a situation that European officials have insisted is impossible because it would hurt other weak countries like Portugal.
But on Tuesday, the EU commissioner Neelie Kroes, in charge of the bloc’s digital policies, said Greece’s exit wouldn’t be a disaster.
Kroes told Dutch newspaper De Volkskrant that “It’s always said: if you let one nation go, or ask one to leave, the entire structure will collapse. But that is just not true.”
Greece has been kept solvent since May 2010 by payments from a euro110 billion ($145 billion) international rescue loan package. When it became clear the money would not be enough, a second bailout was decided last October.
As well as the austerity measures, the bailout also depends on separate talks with banks and other private bondholders to forgive euro100 billion ($131.6 billion) in Greek debt. The private investors have been locked in negotiations over swapping their current debt for a cash payment and new bonds worth 50 percent less than the original face value, with longer repayment terms and a lower interest rate.
Greek government officials say they expect private investors to take losses of an estimated 70 percent on the value of their bonds.
The EU-IMF bailout will also provide an estimated euro40 billion ($52 billion) to protect Greek banks from immediate collapse. Domestic lenders and pension funds hold some 34 percent of the country’s privately-owned debt.
However, the bailout has to be secured for the deal with private investors to go ahead as about euro30 billion from the bailout will be used as the cash payment in the bond swap deal.
Greece’s coalition party leaders held a first key meeting on the austerity measures on Sunday, and postponed a second round of talks by a day so Papademos could complete negotiations with EU-IMF debt inspectors that ended early Tuesday.
The leaders have already agreed to cut 2012 spending by 1.5 percent of gross domestic product _ about euro3.3 billion ($4.3 billion) _ improve competitiveness by slashing wages and non-wage costs, and re-capitalize banks without nationalizing them. But the details remain to be worked out.
Creditors are also demanding spending cuts in defense, health and social security.
European Commission spokesman Amadeu Altafaj Tardio said Monday that Greece was already “beyond the deadline” to end the talks.
Also Monday German Chancellor Angela Merkel warned that “time is pressing,” and “something has to happen quickly.”
While Greece remains cut off from international bond markets _ where it would have to pay interest of about 35 percent to sell 10-year issues _ it maintains a market presence through regular short-term debt sales.
On Tuesday, the public debt management agency said Greek borrowing costs dropped slightly as the country raised euro812 million ($1.06 billion) in an auction of 26-week treasury bills. The coupon was 4.86 percent, compared to 4.90 percent in a similar auction last month, while the auction was 2.72 times oversubscribed.
Iran said Saturday it has evidence that the United States was behind the assassination of an Iranian nuclear scientist this week in Tehran, state media reported.
Mostafa Ahmadi Roshan was killed in a brazen daylight assassination Wednesday when two assailants on a motorcycle attached a magnetic bomb to his car in the Iranian capital. The killing bore a strong resemblance to earlier killings of scientists working on the Iranian nuclear program, and has prompted calls in Iran for retaliation against those deemed responsible.
The IRNA state news agency said Saturday that Iran’s Foreign Ministry has sent a diplomatic letter to the U.S. saying that it has “evidence and reliable information” that the CIA provided “guidance, support and planning” to assassins “directly involved” in Roshan’s killing.
The U.S. has denied any role in the assassination.
Iran delivered the letter to the Swiss Embassy in Tehran, which looks after U.S. interests in the country. Iran and the U.S. have had no diplomatic relations since the 1979 Islamic Revolution.
IRNA also reported that Iran delivered a letter to Britain accusing London of having an “obvious role” in the killing. It said that a series of assassinations began after British intelligence chief John Sawers hinted in 2010 at intelligence operations against the Islamic Republic.
British media have quoted Sawers as saying that intelligence-led operations were needed to make it more difficult for countries like Iran to develop nuclear weapons.
Britain’s Foreign Office has condemned the killing of civilians. Israeli officials, in contrast, have hinted at covert campaigns against Iran without directly admitting involvement payday loans for bad credit.
The killing has sparked outrage in Iran, and state TV broadcast footage Saturday of hundreds of students marching in Tehran to condemn Roshan’s death and calling for the continuation of the country’s disputed nuclear program.
The U.S. and its allies fear Iran’s program aims to develop nuclear weapons. Iran denies the charges, and says its nuclear program is for peaceful purposes only.
In the clearest sign yet that Iran is preparing to strike back for Roshan’s killing, Gen. Masoud Jazayeri, the spokesman for Iran’s Joint Armed Forces Staff, was quoted by the semiofficial ISNA news agency Saturday as saying that Tehran was “reviewing the punishment” of “behind-the-scene elements” involved in the assassination.
“Iran’s response will be a tormenting one for supporters of state terrorism,” he said, without elaborating. “The enemies of the Iranian nation, especially the United States, Britain and the Zionist regime, or Israel, have to be held responsible for their activities.”
Jazayeri also accused the International Atomic Energy Agency of being partially to blame, saying that the U.N. nuclear watchdog made public a list of Iranian nuclear scientists and officials that “has provided the possibility of their identification and targeting by spy networks.”
Workers continued to stash more money in their 401(k) plans in the third quarter, but the stock market’s sharp decline only left them further behind in reaching their savings goals.
The average balance in Fidelity Investments’ plans dropped nearly 12 percent, falling to $64,300 by the end of September from $72,700 three months earlier, the company said Wednesday.
That setback snapped four consecutive quarters of increases, and even put investors behind where they stood a year ago. Their balances were down 2 percent compared with September of last year, according to Fidelity, the largest workplace savings plan provider, with 11.7 million participants.
Blame the 14 percent decline in the Standard & Poor’s 500 index in the third quarter. Investors worried about the European debt crisis and slow economic growth at home, leading to the stock market’s worst quarterly loss since the financial crisis in late 2008.
Workers’ 401(k)s are typically invested in bonds along with stocks to help reduce volatility. Third-quarter investment gains for bonds helped offset some of the stock market’s decline, preventing deeper damage to account balances.
The damage also was eased because workers set aside more from their paychecks to stash in 401(k)s, while employers increased matching contributions.
Fidelity said 84 percent of plan participants contributed over the past 12 months, the highest level in more than two years. Their average contribution was $5,890, setting a record, and up $200 from the same period a year earlier. Employers contributed an average $3,320, an increase of $220.
Over the past 10 years, about two-thirds of annual increases in account balances have been due to workers’ added contributions and company matches, with one-third the result of investment returns, said Beth McHugh, Fidelity’s vice president of market insights.
There are several reasons why changes in account balances don’t match the performance of market indexes. Results depend on the performance of the specific funds an investor holds. Plus, participants in 401(k)s also pay investment fees, which chip away at returns. Investment earnings and contributions can grow tax-free in employer-sponsored 401(k)s, which the government established to encourage saving for retirement.
Balances have risen eight of the 10 quarters since early 2009, when the stock market meltdown reduced the average to $46,200.
Workers who have stayed in the market haven’t been able to rely on investment gains to build up 401(k) savings, because stocks remain about 23 percent below their historic peak in October 2007. Instead, they’ve had to rely on contributions from themselves, and their employers.
Fidelity’s 401(k) participants appear to recognize that, McHugh said. Each quarter for the past two and half years, more workers have increased their contributions than cut them.
However, Fidelity reported a recent slight increase in hardship withdrawals from 401(k)s, reflecting the financial stress many workers face as the economic recovery struggles to find momentum. About 2.3 percent took hardship withdrawals over the 12 months ended Sept. 30. In the latest 12-month period, workers making hardship withdrawals removed an average $5,800.
“People are still looking at their retirement accounts as a source of funds,” McHugh said. “We recommend people look at it as a last resort.”
The major reason? Hardship withdrawals can subject the participants to taxes and possible early withdrawal penalties, if they occur before age 59 1/2. Withdrawals also leave less money in an account to grow as a result of potential market gains and compounding, setting an investor back further in reaching their goals.
Toyota will begin taking orders Tuesday for the plug-in version of its hit Prius hybrid, announcing efficient mileage and a relatively affordable starting price of 3.2 million yen ($41,000), which comes down with green vehicle subsidies.
Toyota is targeting Prius Plug-in sales of 35,000 to 40,000 a year in Japan, and 60,000 globally. The car is set for delivery in Japan in January. With subsidies the cost comes down to 2.75 million yen ($35,200). It starts at $32,000 in the U.S. and 37,000 euros in Europe, according to Toyota.
Japan’s top automaker says the plug-in, which it calls the Prius PHV, is for those who want something more innovative than a regular gasoline-electric hybrid, but are worried about running out of power on the road, as can happen with pure electric vehicles.
When a plug-in runs out of power to keep the electric vehicle going, it becomes a hybrid.
“The plug-in is the premier next-generation ecological car that will follow the hybrid,” said Executive Vice President Takeshi Uchiyamada, the Toyota Motor Corp. engineer known as the “father of the Prius.”
The Prius Plug-in has an estimated electric vehicle cruise range per charge of 26.4 kilometers (16 miles), according to Toyota.
Its mileage is estimated at 61 kilometers per liter for Japanese test conditions, which converts to a whopping 143 miles per gallon. Such numbers vary depending on road conditions. Toyota is promising 87 mpg for the U.S. Prius Plug-in, which will be delivered starting in March. Orders are already being taken online in the U.S.
Green cars such as the Prius Plug-in are expected to take centerstage at the Tokyo Motor Show, which opens to the public this weekend.
Japanese consumers have taken to the Prius, despite a languishing auto market overall, thanks to government-backed subsidies. Nations around the world are offering similar perks, boosting its chance for success.
The Prius Plug-in, which seats five people, comes with a new lithium-ion battery that can be charged from a household outlet, much like an electric car. It also recharges itself while driving like a gasoline-electric hybrid. The battery is more powerful and compact so the back trunk fits three golf bags.
Uchiyamada told reporters that the plug-in was the best solution for green cars as most Japanese don’t drive more than 20 kilometers (12 miles) a day and Toyota studies showed that most people don’t want to use EVs for drives longer than 100 kilometers (60 miles).
How the plug-in fares in coming months will help show whether Toyota can keep riding on its success of the Prius as a global leader in green technology. Toyota said it had collected data from 600 people around the world who had leased the plug-in on a trial basis.
Toyota has sold more than 3.4 million hybrids worldwide so far, including models other than the Prius.
Selling in big numbers is important because it helps cut costs and allows the automaker to offer products at affordable prices.
Honda Motor Co., which has also been aggressive with hybrid technology, has sold 770,000 hybrids worldwide.
Nissan Motor Co., which hasn’t released a global hybrid sales number, is banking more on pure electric, selling 17,500 Leaf cars around the world so far.
In Japan, Toyota will work on services with its housing unit to support plug-in owners’ charging stations, it said.
Iraq on Sunday signed a multibillion-dollar deal with Royal Dutch Shell PLC and Japan’s Mitsubishi Corp. to tap natural gas in the south, one of the biggest agreements by the OPEC member to develop an energy sector battered by years of neglect and war.
The $17 billion deal forms a joint venture to gather, process and market gas from three oil fields in the oil-rich province of Basra. That gas, pumped in conjunction with crude oil, is currently burned off _ or flared _ due to lack of infrastructure.
The 25-year joint venture is called Basra Gas Company. Iraq will hold a 51 percent stake, to Royal Dutch Shell’s 44 percent and Mitsubishi’s 5 percent shares. The gas will be used mainly for domestic energy needs, but there is also an option for exports.
Iraq’s Oil Minister, Abdul-Karim Elaibi hailed the signing as “historic turn in Iraq’s oil industry.”
Shell CEO Peter Voser told reporters that Iraq is now a “…substantial part of Royal Dutch Shell’s portfolio in the Middle East.”
For Iraq, the deal is a key part of its strategy to alleviate power generation woes. Despite billions of dollars spent since the 1990s to rebuild Iraq’s dilapidated electrical grid, Iraqis still suffer through chronic power outages that have led to sometimes violent protests.
The deal is Shell’s third in Iraq since the 2003 U.S.-led invasion, and it will bolster the company’s presence in a country which sits atop 143.1 billion barrels of crude oil and 126.7 trillion cubic feet of gas reserves.
A memorandum of understanding on the Shell gas deal was signed in September 2008, but the venture has been bogged down ever since. Some lawmakers argued that the deal should have been approved by parliament and officials in Basra wanted more benefits for their province cash advance today.
Iraq burns off almost half of the 1.5 billion cubic feet per day of gas that it produces. The deal will help the country capture more than 700 million cubic feet per day of gas from three fields.
They are the 17.8 billion-barrel Rumaila field being developed by a BP-CNPC consortium, the 4.1 billion barrel Zubair field, handled by an Eni-led consortium and partners Occidental Petroleum Corp. and KOGAS, as well as the 8.6 billion barrel West Qurna Stage 1, which is being developed by ExxonMobil-Shell consortium.
ExxonMobil has recently been embroiled in controversy after it became known that the company had signed a contract with the Kurdish regional government _ and not the Oil Ministry in Baghdad _ to develop oil fields in northern Iraq.
The Kurdistan Regional Government has clashed with Baghdad over who has the right to sign deals with international oil companies to develop Iraq’s vast energy resources.
The Kurds, who control three provinces in northern Iraq, want to be able to sign contracts with international oil companies to develop their own fields, while Baghdad maintains it has final authority.
On Sunday the oil minister said the ministry sent letters to ExxonMobil asking for an explanation of the reports that they signed these deals, but has not yet heard a response. He declined to comment on what penalties the Texas-based company might face.
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