NEW YORK (
) - Wall Street CEOs were dominating the headlines this week as they spouted off on everything from the European crisis to regulation and compensation at the World Economic Forum at Davos, Switzerland.
Here's a roundup of some of the notable things they said.
CEO Vikram Pandit was in the spotlight at Davos this week, as one of the six co-chairs at the World Economic Forum.
Pandit spoke at a panel on the reshaping of the global financial system and will be on another panel about issues in 2012 on Jan.29.
Citigroup reported a disappointing fourth quarter earlier this month, with securities and banking taking a nasty hit and expenses continuing to climb.
Still, with the bank reporting its second straight profitable year, Pandit was awarded $3.7 million in stock. Here's what the CEO had to say in his interviews with the media.
Pandit said the bank will proceed with caution in 2012 as he expected the overhang from Europe to continue. "The basic issues of countries refinancing at a very high rate and GDP growth actually going down, those are not good facts," he told
. "So we got to resolve those issues before the European sovereign debt issue's behind us."
He also said that capital markets will likely remain volatile in 2012. "We have got to acknowledge that the European overhang is real. While the sentiment has improved, it is still with us. As long as it is still with us, we are going to have events that cause a lot of volatility. We might have risk on risk off for a while," he told the channel.
"The banking industry still has a lot of work to do in terms of rebuilding trust. There is still a lot of anger out there directed at the financial industry for the crisis and that is something that needs to be addressed. You got to acknowledge it and then you got to rebuild trust," he told
. "I think banks have to start serving clients and really serve them rather than serving themselves. That is a transition that takes time. we are there as a bank. The financial industry has to do that more broadly overall."
On expense cuts:
The CEO said the bank will cut between $2.5 billion to $3 billion in expenses next year and remains committed to creating operating leverage. He said the bank will right size some businesses based upon where the opportunity is.
CEO Jamie Dimon was a co-chair at the forum in 2008. In an interview with
, Dimon talked about a range of issues, particularly with regard to Europe and regulation. Here's a round up of what he had to say.
The CEO said the European Central Bank had taken the biggest risk- liquidity issues- off the table with its Long Term Refinancing Operation.
He also said the direct impact of a Greece default- as opposed to a voluntary restructuring- on banks would be "almost zero", although the impact on the global economy could filter its way down to American Banks. " The default in and of itself isn't going to be the disaster. We all know about it. It won't take down the western world."
He said Spain and Italy were the nations to watch because they dwarf the size of the others. He expected that Europe will somehow "muddle through" the crisis.
Dimon said he was in favor of putting an end to "Too Big To Fail."
"We have to get rid of too big to fail. We should describe it as bankruptcies for big dumb companies, including banks." He added that the regulators would be able to handle the failure of a bank like JPMorgan if necessary.
"If you go back to '08 ...if Lehman or
had gone bankrupt in 2004, it would have been isolated an event that the world could have taken care of. In 2008 we were just seeing failure after failure after failure," he said referring to the issues with Fannie Mae, Freddie Mac, Washington Mutual that all preceded Lehman. "It would be very different if it is an isolated event and not the whole system that is starting to unravel."
Brian Moynihan was predictably peppered with questions about
Bank of America's
earnings strength and outlook for capital markets.
Moynihan said in an interview with
the core issue for Bank of America is "to drive the core earnings, and we've got to get the costs down in the company, which we're working on. And then as the economy continues to move along, even at the 2 percent growth level, we'll start to materialize more and more earnings, and that's what we need to do."
In a separate interview with
, he said the bank will make a lot more money in a normalized environment though he would not put a number on it. He said three things the bank need to work on was to get costs down, see an improvement in the interest rate environment and get bad mortgage costs behind them.
"The stair steps are there and 2012 is about a year of getting those stair steps and start climbing forward," he said.
" Everyone is at the point that we got to figure out how to get all this regulation through. At the same time we got to balance the fact that we got very low growth for these very large economies and we need to know how to balance it, so that we don't deleverage so much that we slow it down," he told Bloomberg.
Gorman sounded optimistic about the company's prospects for 2012 with firmer capital levels and its legacy issues out of the way, following its MBIA settlement. "For the first time in three or four years the company is competing on its own merits," he told CNBC in an interview. He said the U.S. was in better sharep than the markets have appreciated and stocks are playing catch up. Europe was also moving towards resolution. "The overall tone is certainly not worse than last year. I think there's room for optimism."
Morgan Stanley slashed compensation for its employees in 2011, capping cash bonuses at $125,000 for the year and deferring amounts higher than that over a three to four year period. While employees might be dismayed at the sharp bonus cuts, Gorman thinks they should stop complaining and suck it up.
"You're naive, read the newspaper, No. 1," Gorman said he would tell his employees in an interview with Bloomberg Television. "No. 2, if you put your compensation in a one-year context to define your overall level of happiness, you have a problem which is much bigger than the job. And No. 3, if you're really unhappy, just leave. I mean, life's too short."
"When we come out of this and we start re-performing, obviously compensation will reflect that. Until then, we have to respect the fact that shareholders have to get paid, too," he said.
On capital plans:
Gorman said the investment bank was more inclined towards consolidating its stake in Smith Barney. "Our strategic priorities are more important than our financial engineering now," he told CNBC. "I think prudently in this environment where you've got to focus is positioning yourself strategically so over the next several years, we'll be accruing plenty of earnings to do buybacks. It's sequencing. You can always go back and reapply with a 90-day period to get whatever next tranche or issue or dividend or capital you might want."
Anshu Jain, head of the investment banking of Deutsche Bank and soon to be co-CEO, spoke to
about his outlook for Europe and the banking industry in a new regulatory environment.
Like the other CEOs, Jain believes that the year has begun on a "mildly better note" but said it was "hard not to be cautious."
"The possibility of a tail event continues to hang over us and until that changes higher volatility is the new norm and we just have to live with that," he told Bloomberg Television.
He pointed out that the big difference between the events of September 2008 and now was that then, the events came as a true surprise because markets were very optimistic. Now "tail events are pretty well flagged by prices."
He also said that the situation in Europe was more complex and there wasn't going to be a magical solution in the near term that the markets would like. "The concept equally that we can deficit spend our way out of the mess and all that is needed is a U.S.-style cutting of rates, quantitative easing, monetization of debt and profligate spending, I don't subscribe to either."
He said that he believes a fiscal compact between the nations is essential.
On Low Returns in Investment Banking
: Higher capital due to basel 3 and restrictions on earnings due to new regulations did not build a case for higher ROEs. But "there was going to be powerful consolidation within the industry. Those who survive it will have higher margins in the longer term," he said, adding that margins could be more normal in two to three years.
--Written by Shanthi Bharatwaj in New York
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