Bank Risk Levels: Friday's Headlines

Citigroup and other U.S. banks were in focus Friday after a report that they temporarily lowered their debt to mask risk levels
By Robert Holmes ,

NEW YORK (

TheStreet

) -- Here are the top stock market headlines for the morning of Friday, April 9, 2010.

Friday's Early Headlines

  • Majors Banks Masked Risk Levels: Report -- Major banks masked their risk levels over the past five quarters by temporarily lowering their debt just before reporting it to the public, The Wall Street Journal reports, citing data from the Federal Reserve Bank of New York. A group of 18 banks -- including Goldman Sachs (GS) - Get Report, Morgan Stanley (MS) - Get Report, JPMorgan Chase (JPM) - Get Report, Bank of America (BAC) - Get Report and Citigroup (C) - Get Report -- understated the debt levels used to fund securities trades by lowering them an average of 42% at the end of each of the past five quarterly periods, the Journal reports, citing the data. The banks then boosted the debt levels in the middle of successive quarters.
  • Spreads on Greek Government Bonds Tighten -- Reuters reports that the yield spread of 10-year Greek government bonds over German bonds had fallen to 416 basis points, one day after hitting a record 463 basis points. In separate reports, Reuters reports that European Central Bank president Jean-Claude Trichet said in an interview that Greece is not at the point where it needs a bailout and it is in no danger of defaulting. Additionally, Reuters interviewed a Greek government official who said Greece will auction a total of 1.2 billion euros of 6- and 12-month Treasury bills on April 13.
  • KKR, Bain Prepping Toys 'R' Us, HCA IPOs -- Private-equity giants KKR and Bain Capital are preparing initial public offerings for three of their larger holdings -- retailer Toys "R" Us, hospital chain HCA and chip company NXP Semiconductors, The Wall Street Journal reports. KKR and Bain could cash out their stakes and return money to investors, the Journal says. They also could use the proceeds to offload sizable debt used to finance the takeovers.
  • Macarthur Coal Attracts a Third Suitor -- Australian miner Macarthur Coal rejected a bid from a third suitor who has joined the bidding war, saying the offer didn't represent an "adequate premium for control of the company." The new $3.4 billion bid came from rival Australian miner New Hope, the third acquisition bid following ones from U.S. coal miner Peabody Energy (BTU) - Get Report and Noble Group, a Hong Kong-based commodities company.
  • Boston Scientific Mulls Sale of Two Units -- Boston Scientific (BSX) - Get Report is looking to sell its Target Therapeutics and neuromodulation units, Bloomberg reports. Citing an unnamed source, the report said that Bank of America will be advising Boston Scientific on the sale of the two units and that the medical device maker has been approaching possible buyers in the last few weeks.
  • Yahoo! Loses Its Chief Technology Officer -- Yahoo!'s (YHOO) chief technology officer and chief product officer Ari Balogh is leaving the company. Yahoo!, in a statement, said Balogh was leaving for personal reasons but would remain with the company through June 3. Yahoo! said it expects to name Balogh's replacement in the coming weeks. The news of Balogh's departure was first reported by BoomTown, a blog from The Wall Street Journal.
  • Clorox Could Sell STP, Armor All Brands -- Clorox (CLX) - Get Report is looking to auction its two well-known automotive brands, STP and Armor All, The Wall Street Journal reports, citing people familiar with the matter. Clorox could hire an investment bank within the next couple of months to advise on the sale, these people added. STP and Armor All have combined annual sales of about $300 million.

Friday's Earnings Roundup

  • Ambac Financial (ABK) reported fourth-quarter net income of $558.1 million, or $1.93 a share, which swung from a year-ago loss of $2.34 billion, or $8.14 a share. Results included a $472 million tax benefit, Ambac said. Ambac shares surged more than 50% in the premarket session.
  • Joe's Jeans (JOEZ) posted a first-quarter profit of a penny a share on revenue of $23.2 million, which was up more than 40% from the year-ago quarter. While the revenue result was well above the lone analyst target of $18.4 million, traders appeared disappointed that Joe's Jeans matched with its earnings-per-share figure, as the stock fell roughly 10% in early trading.

-- Written by Robert Holmes in Boston

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