News Archive

EU bank reform must reflect French, German regulations: French finmin

PARIS (Reuters) – France wants to make sure that EU banking reform proposals reflect regulations already in place in France and Germany, Finance Minister Pierre Moscovici said on Thursday, voicing concerns that the current plans favor banks in London.

The European Commission unveiled a blueprint to rein in high-risk trading at big banks on Wednesday, despite concerns in Paris and Berlin that it would threaten their biggest lenders.

“I will be very vigilant about the choices that are made in the European text so that it does not call the French reform into question,” Moscovici told Reuters in an interview. “This is something we are keeping an eye on with Germany.”

The Commission’s proposals go as far as banning the biggest banks from making speculative bets on stocks, bonds and commodities for their own profit, whereas France and Germany want such trading ring-fenced at big lenders.

France and Berlin have been keen for the Commission’s proposals to reflect this given that they have recently carried out their own banking reforms.

“It’s important that the Commission has a neutral position and avoids giving one model preference over another or calling into question ambitious reforms that two big countries, France and Germany, have already put into place,” he said.

The French banking industry has voiced concerns that the Commission’s proposals gave an advantage to banks in London in some corporate financing activities.

“Britain finds itself in a relatively favorable position in this proposal,” Moscovici said.

The head of the French central bank, Christian Noyer, slammed the Commission’s proposal hours after it was presented on Wednesday, describing it as “irresponsible and contrary to the interests of the European economy.”

(Reporting by Leigh Thomas, Jean-Baptiste Vey and Yann Le Guernigou; Editing by Hugh Lawson)

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Activist Barington calls for split of Darden chairman, CEO roles

(Reuters) – Barington Capital Group called on Darden Restaurants Inc’s (DRI.N) directors to split the chairman and chief executive roles as the activist investor lobbies for what it calls value-creating changes at the parent of Olive Garden and Red Lobster.

“We believe that the board should immediately appoint an independent chairman” to protect shareholder interests, James Mitarotonda, Barington’s chairman, president and CEO, said on a conference call on Thursday.

The move would affect Darden CEO and Chairman Clarence Otis. He has been CEO of the company, the largest U.S. full-service restaurant operator, since November 2004 and chairman of Darden’s board of directors since November 2005.

Otis orchestrated Darden’s acquisitions of LongHorn Steakhouse, Capital Grille, Eddie V’s and Yard House. Barington and other critics say those moves led to a lack of focus, bloated operating costs and roughly 18 months of market share losses at its three biggest brands.

Darden declined to comment on Barington’s statements on Thursday. It previously has said that the plan it announced in December is in the best interest of all Darden shareholders and that it was moving ahead with that plan.

Mitarotonda did not call for Otis to be replaced.

“We continue to remain hopeful that Mr. Otis will reconsider the points we have raised, and therefore are reserving judgment on whether he should remain CEO,” Mitarotonda said.

Barington, which represents a group of shareholders that holds more than 2 percent of Darden outstanding shares, repeated its call for the company to split. One company would operate the mature Olive Garden and Red Lobster chains. The other would expand brands such as LongHorn Steakhouse, Seasons 52, Capital Grille and three others.

Darden in December responded with a proposal to spin off or sell Red Lobster and to cut costs.

Barington said it would strongly object to such deals if Red Lobster’s real estate, which Barington valued at about $1.6 billion, was included because it would destroy significant shareholder value.

Starboard Value, a second activist investor in Darden with a 5.5 percent stake, called the Red Lobster plan, “a hurried, reactive attempt in the face of shareholder pressure to do the bare minimum to appease shareholders.”

Barington also is pushing Darden to explore creating a publicly traded real estate investment trust (REIT) to “unlock the value” of its property holdings, which it valued at around $4 billion before leakage costs.

Otis said in December Darden had reviewed the potential for a REIT and determined that substantial costs and other factors did not make this a viable option.

Barington representatives on Thursday said the long-term benefits of creating a REIT would greatly outweigh the costs.

Refinancing all of Darden’s properties would result in $350 in breakage fees, or debt retirement costs, plus $40 million to reissue new debt – working out to about $3 per share, they said. Representatives called those figures a worst-case scenario, since they don’t believe all of the debt would need to be refinanced.

They added that the REIT should qualify as a tax-free transaction and that its credit rating would be high BB to low BBB – better than many other triple-net REITS.

(Reporting by Lisa Baertlein in Los Angeles; Editing by Jilian Mincer and Nick Zieminski)

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Exxon Mobil profit tumbles as energy production tapers

(Reuters) – Exxon Mobil Corp (XOM.N), the world’s largest publicly traded oil company by market value, posted lower-than-expected quarterly profit on Thursday as it failed to offset declining production but spent heavily to find fresh reserves.

The problem of declining production at legacy oil and natural gas wells has become endemic for multinational energy groups, which have tried to offset the trend by launching massive and risky exploration projects.

Exxon’s oil and natural gas production dropped 1.8 percent in the fourth quarter from year-ago levels, with natural gas production falling around the world and oil output slipping in half the regions where the company operates.

The results reflected a “mediocre quarter” for Exxon, especially in international production, Edward Jones analyst Brian Youngberg said.

“They’ve lost momentum already, reverting back to declining production and stagnant earnings,” Youngberg said.

Exxon rival Royal Dutch Shell Plc (RDSa.L) said on Thursday the fourth quarter was its least profitable in five years as its own production slipped.

To assuage Wall Street, Chief Executive Officer Rex Tillerson promised in a statement that the company will ramp up exploration projects over the next two years to find newer reserves.

Exxon spent $42.5 billion in 2013 on exploration and other capital projects, a staggering sum that led Tillerson to admit last year: “I never would have dreamed we’d be spending at this level.

Exxon’s liquefied natural gas operation in Papua New Guinea should make its first deliveries by September, while expansions at the Kearl oil sands development in Canada and the Upper Zakum oil project in Abu Dhabi are underway, executives said on a conference call with investors.

The company also is expanding in U.S. shale formations, adding rigs in the Permian formation in Texas and running all rigs available in the Bakken formation in North Dakota and the Woodford Ardmore shale in Oklahoma.

These and other projects should help Exxon reach its goal of boosting annual oil and natural gas production 2 percent to 3 percent by 2017.

Investors said they supported the new exploration if it helps increase total production.

“If it’s done in the context of normal exploration, or a change in the makeup of demand, that’s probably a positive,” said Oliver Pursche of Gary Goldberg Financial Services, who manages Exxon shares for clients. “If it’s as a result of existing wells are drying up, that’s a negative.”

For the fourth quarter, Exxon posted net income of $8.35 billion, or $1.91 per share, compared with $9.95 billion, or $2.20 per share, in the year-ago period.

Analysts expected earnings of $1.92 per share, according to Thomson Reuters I/B/E/S.

Earnings fell in all of the company’s units, including refining, where weaker margins eroded profit.

Refiners make more money when the price difference between various types of crude oil is wide. When the gap narrows in the price difference between West Texas Intermediate crude oil and Light Louisiana Sweet crude oil, as it has in recent months, costs tend to rise.

The company’s chemical unit profit dropped slightly due in part to higher supply costs, especially for high-end specialty materials.

Separately, Exxon said it supports U.S. exports of crude oil, a potentially divisive issue in the country.

“We oppose any barriers or restrictions to free trade,” David Rosenthal, Exxon vice president of investor relations, told investors on the call.

Shares of Exxon fell 0.8 percent to $94.32 in afternoon trading.

(Reporting by Ernest Scheyder in New York; Additional reporting by Anna Driver in Houston; Editing by Jeffrey Benkoe)

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Households, trade keep U.S. economy humming in fourth quarter

WASHINGTON (Reuters) – Strong household spending and robust exports kept the U.S. economy on solid ground in the fourth quarter, but stagnant wages could chip away some of the momentum in early 2014.

Gross domestic product grew at a 3.2 percent annual rate in the final three months of last year, the Commerce Department said on Thursday, in line with economists’ expectations.

While that was a slowdown from the third-quarter’s brisk 4.1 percent pace, it was a far stronger performance than had been anticipated earlier in the quarter and welcome news in light of some drag from October’s partial government shutdown.

“The economy was firing on almost all cylinders as 2013 came to a close. For today, the sun is out and shining,” said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ in New York.

Early in the quarter many economists were expecting a growth pace below 2 percent given that an inventory surge accounted for much of the increase in the July-September period.

Taking both quarters together, growth came in at a 3.7 percent pace, up sharply from 1.8 percent in the first six months of the year. It was the biggest half-year gain since the second half of 2003.

Stocks on Wall Street pushed higher on the back of the report, rebounding from the previous session’s decline. U.S. Treasury debt prices fell, while the dollar rose against a basket of currencies.

Consumer spending was the main driver of fourth-quarter growth, but there was also a strong boost from trade. Business investment also lent support as did the restocking of warehouses, but not at the same scale as in the third quarter.

The report was released a day after the Federal Reserve announced another reduction to its monthly bond purchases and shrugged off a surprisingly sharp slowdown in job growth in December.

“If this keeps up, the Fed will have to consider speeding up its too-slow exit strategy,” said Rupkey.

Consumer spending rose at a 3.3 percent rate, the strongest since the fourth quarter of 2010. Consumer spending, which accounts for more than two-thirds of U.S. economic activity, advanced at a 2 percent pace in the third quarter.

Some economists said solid consumer spending likely encouraged businesses to continue accumulating stocks.

Inventories increased $127.2 billion, the most since the first quarter of 1998. That added 0.42 percentage point to GDP growth. Inventories had risen $115.7 billion in the third quarter, contributing 1.67 percentage points to output.

“We have not seen this level of back-to-back strength in some time. I would say this is the strongest signal that consumption will continue to grow in coming quarters,” said Tim Hopper, chief economist at TIAA-CREF in New York.

Excluding inventories, the economy grew at a 2.8 percent rate, up from the third-quarter’s 2.5 percent rate.


The sturdy increase in demand should put the economy on a stronger growth path this year. However, anemic wage growth could take some edge off consumer spending early in the year.

In addition, some economists view the current level of inventories as unsustainable and expect a correction beginning in the first quarter. In addition, business investment could cool off after a surprise tumble in orders for capital goods excluding defense and aircraft in December.

The strong performance from trade is also unlikely to be repeated as slowing growth in China is expected to curb exports, while firming domestic demand will suck in imports.

Even so, a lessening of the fiscal austerity that gripped Washington last year should keep the economy on a firmer growth path this year. Economists expect growth this year of 2.9 percent, up from last year’s 1.9 percent.

“We do not expect another large contribution from trade, inventories have reached levels that are unlikely to be maintained, and private domestic demand shows slightly less momentum,” said Peter D’Antonio, an economist at Citigroup in New York.

“Nevertheless, we anticipate that the underlying path of growth will continue to strengthen toward the 3 percent range for all of 2014.”

Slack in the labor market has restrained wage growth. In a separate report, the Labor Department said new applications for state unemployment benefits rose 19,000 last week to 348,000.

Consumption in the fourth quarter came at the expense of saving. The saving rate slowed to 4.3 percent in the fourth quarter from 4.9 percent in the prior period.

Income at the disposal of households after accounting for inflation rose at a tepid 0.8 percent rate. That was a sharp slowdown from the 3.0 percent pace in the third quarter.

“Income growth remains the biggest constraint to growth. We will not achieve sustainable strong growth unless wage growth picks up,” said Joel Naroff, chief economist at Naroff Economic Advisors in Holland, Pennsylvania.

Sluggish wages kept inflation pressures benign. A price index in the GDP report rose at a 0.7 percent rate, decelerating from the third-quarter’s 1.9 percent pace. A core measure that strips out food and energy costs increased at a 1.1 percent rate after advancing at a 1.4 percent pace in the July-September period.

Exports rose at their fastest pace in three years. That combined with declining petroleum imports to narrow the trade deficit. Trade contributed 1.33 percentage points to GDP growth.

Business spending on equipment accelerated at a 6.9 percent rate in the fourth quarter after rising at only a 0.2 percent pace in the prior three months. But here was a decline in business spending on nonresidential structures.

A run-up in mortgage rates, which held back home sales and renovations, saw residential investment falling for the first time since the third quarter of 2010. Home sales have been on the back foot in recent months and that trend is likely to persist for a while as the market adjusts to higher loan rates.

A third report showed contracts to buy previously owned homes tumbled 8.7 percent in December to a two-year low.

Government spending contracted at a 4.9 percent pace, reflecting the 16-day partial shutdown of the federal government in October and a plunge in defense spending. The Commerce Department said the shutdown sliced 0.3 percentage point off of GDP growth through reduced hours worked by federal employees.

(Reporting by Lucia Mutikani; Editing by Andrea Ricci)

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U.S. seeks $2.1 billion from Bank of America in fraud case

NEW YORK (Reuters) – The U.S. government has raised the amount it is seeking in penalties from Bank of America Corp (BAC.N) to $2.1 billion after a jury found the bank was liable for fraud over defective mortgages sold by its Countrywide unit.

The request in a court filing late on Wednesday was based on gross revenue generated by the fraud, the government said. The Justice Department had previously asked for $863.6 million.

The initial request was based on gross losses it said government-sponsored mortgage finance companies Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB) incurred on loans purchased from Countrywide Financial Corp in 2007 and 2008.

In a December hearing, a judge asked the bank and the Justice Department to brief him on how he might base the penalties on Countrywide’s gains rather than losses resulting from the mortgage sales.

A federal jury in New York in October had found Bank of America and Rebecca Mairone, a former mid-level executive at Countrywide, each liable for fraud in the civil lawsuit.

The case focused on a mortgage lending process at Countrywide, which Bank of America acquired in July 2008, called the “High Speed Swim Lane,” or alternatively “HSSL” or “Hustle.”


The government contended that Countrywide’s program emphasized and rewarded employees for the quantity rather than the quality of loans produced, and eliminated check lists designed to ensure that loans were sound.

Bank of America and Mairone denied wrongdoing. Bank of America has said it was evaluating options for an appeal.

“This claim bears no relation to the limited Countrywide program that lasted several months and ended before Bank of America’s acquisition of the company,” Lawrence Grayson, spokesman for the bank, said on Thursday.

Any penalty would be assessed by U.S. District Judge Jed Rakoff. At the December hearing, he asked for a “more full presentation” on how to calculate the penalty on Countrywide’s gains, calling it a simpler approach.

Evidence the government presented at trial indicated Countrywide earned $165.2 million selling the loans.

But in its filing Wednesday, lawyers working in the office of Manhattan U.S. Attorney Preet Bharara said the penalty should be based on Countrywide’s gross gain, rather than net gain.

The government urged the judge to set the maximum penalty to “punish defendants for their culpability and bad faith, and to deter financial institutions and their executives who would engage in similar fraudulent mortgage schemes”.

The potential penalties, if approved by Rakoff, would add to the more than $45 billion Bank of America has already agreed to pay to settle disputes stemming from the 2008 financial crisis.

Bank of America’s litigation expenses jumped in the fourth quarter of 2013 to $2.3 billion from $916 million a year earlier.

In its brief, the government said it continued to also seek a $1.1 million penalty from Mairone based on her ability to pay.

Marc Mukasey, a lawyer for Mairone, in an email on Thursday said the government had made his client a “scapegoat” when her supervisors and risk managers all approved the mortgage origination process at issue.

Bank of America is scheduled to respond to the government’s motion on February 26. Oral argument before Rakoff is scheduled for March 13.

The case is U.S. ex rel. O’Donnell v. Bank of America Corp et al, U.S. District Court, Southern District of New York, No. 12-01422.

(Reporting by Nate Raymond in New York; Editing by Lisa Von Ahn and Sophie Hares)

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Analysis: Growth, investment at risk from emerging markets rate hikes

LONDON (Reuters) – A growth-crushing downward spiral looks imminent for emerging markets, threatening to turn back the tide of foreign investment that flooded into developing countries on the premise of fast economic expansion.

Countries in Asia, Latin America and emerging Europe are being forced to raise interest rates sharply to stave off currency collapses and a wholesale exodus of foreign investors. Turkey, India and South Africa jacked up rates this week, heaping pressure on others to follow suit.

Whether these steps will steady the currencies is unclear, but one thing is sure – economic growth, developing countries’ main trump card over their richer peers, will take a hit.

Analysts reckon Turkey’s dramatic 425 basis point rate hike could almost halve this year’s growth rate, to 1.7-1.9 percent, for example, while the South African Reserve Bank, which raised by half a point, cut its estimates for 2014 and 2015 growth.

Indonesia’s economy last year probably grew at its slowest pace in four years, below its long-term average of above 6 percent, after 175 bps in policy tightening since June.

Even before the latest increases in borrowing costs, developing country growth rates were under the cosh.

Not only was the developing world’s 4.7 percent growth last year almost a full percentage point under International Monetary Fund forecasts, its premium over growth rates in advanced countries has shrunk to its lowest in a decade.

In Brazil and Russia, growth is running below the levels forecast for Britain and the United States in 2014.

That is very bad news for the investment outlook, going by the findings of a recent IMF study that examined capital flows for 150 countries between 1980 and 2011.

Net capital flows to emerging economies, estimated at as much as $7 trillion since 2005, have tended to be highest during periods when their growth differential over developed economies is high, the paper found.

And investment flow is also “mildly pro-cyclical” with domestic growth rates, the paper said, meaning that as developing economies expand, they draw more investment.

“Investors are getting what they asked central banks for – higher interest rates. But there is no denying that there is a massive headwind to capital flows into emerging markets,” said David Hauner, head of EEMEA fixed income strategy and economics at Bank of America Merrill Lynch.

“Historically the two main drivers of capital flows to EM (are) the difference between EM-DM growth… (and) real U.S. interest rates which are starting to go up.”


Higher interest rates raise borrowing costs for the corporate sector and curb credit growth and consumer demand, thus hurting companies’ profits. They also make fixed income assets less attractive.

Clearly then, bad news for bond and equity investors who, Thomson Reuters service Lipper says, have pumped almost half a trillion dollars into emerging assets in the past decade.

Add to that bank loans, merger and acquisition deals and direct investments by foreign companies into manufacturing and services, and the figure just since 2005 could be as large as $7 trillion, Institute of International Finance data show.

Like Hauner, Morgan Stanley analysts see the central bank moves as broadly positive, in that they raise inflation-adjusted, or real interest rates. That ultimately makes economies more competitive by slowing wage growth.

In the meantime though, emerging markets are exposed to the risk of a sudden stop in capital flows, highlighting potential ructions on credit markets, asset prices, economic growth and also politics as a result of the rate rises.

“Will we see an orderly slowdown, or a more disorderly unwind?” Morgan Stanley said in a note. “An orderly deceleration in growth will also be important in keeping political uncertainty at bay with elections ahead of us in many double-deficit countries.”

India, Brazil, Turkey, Indonesia and South Africa are among key developing countries facing elections in 2014 and which are seen as vulnerable to the withdrawal of the Fed’s cheap cash because of their budget or current account deficits.


Equity investors found out the hard way in China that fast economic growth doesn’t equate with investment returns, enduring miserable stock market performance for two decades even as the economy grew at turbo-charged rates.

Slowing growth is at least partly driving heavy outflows from emerging markets, where funds tracked by EPFR Global shed over $50 billion in 2013 and over $8 billion so far this year.

But the growth allure is yet to completely fade, with many investors focusing on long-term positives such as demographics or low ownership of goods such as mobile phones or cars.

The question is when will asset prices reflect the inevitable growth-inflation hit these developing countries will take, says Steve O’Hanlon, a fund manager at ACPI Investments.

“Markets are pricing a pretty dire situation in emerging markets (but) is EM cheaper given potential future output? I wouldn’t say so but it’s getting there,” O’Hanlon said.

“When currencies stop selling off, if (governments) produce real reforms, I will be investing in those markets. If you don’t see any reforms, the rate hikes will just destroy growth, discourage investors and make the situation far worse.”

(Additional reporting by David Gaffen in New York and Reuters bureaux in Latin America and Asia; Graphic by Vincent Flasseur; Editing by Catherine Evans)

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Facebook shares surge as mobile ads click

(Reuters) – Facebook Inc’s shares rose as much as 17 percent to a life-high after the company’s resounding revenue growth underscored CEO Mark Zuckerberg’s success in selling ad space on the social network’s mobile app.

At least 32 brokerages raised their price targets on Facebook’s shares, which touched a high of $62.50 in midday trading on Thursday.

If the gains hold to close, this would be the largest single-day rise in Facebook’s stock since July 2013. The company would have added about $20 billion to its market capitalization of $136 billion, putting it among the top 20 in the SP 500 index.

The highest price target among the 32 brokerages was $82, which would value the world’s largest social network at more than $200 billion.

Facebook’s fourth-quarter revenue rose to $2.585 billion from $1.585 billion in the year-ago period, beating analysts’ average expectation of $2.33 billion.

“After disappointing earnings from large-cap internet stocks like eBay and Yahoo, it was refreshing to see FB crush Q4 consensus estimates, with accelerating trends in its core advertising business,” CRT Capital analyst Neil Doshi wrote.

Facebook said on Wednesday revenue from mobile ads represented 53 percent of its total fourth-quarter advertising revenue, up from 49 percent in the third quarter.

While the total number of ad impressions on Facebook declined 8 percent, some analysts attributed that to the company’s shift to mobile and focused instead on the near-doubling of ad pricing in the last year.

Macquarie (USA) Equities Research analyst Ben Schachter said Facebook had focused on improving the quality and relevance of advertisements, rather than boosting ad load, in order to drive revenue growth.

Facebook’s latest newsfeed ads, which inject paid marketing messages straight into a user’s stream of news and content, are ideally suited for mobile screens.

“We expect several more quarters ahead of expanding newsfeed ad pricing, and also suspect the ad model on Facebook will continue to evolve rapidly, leaving room for future positive surprises,” Canaccord Genuity Michael Graham wrote.

Facebook and rival Google Inc have been looking for ways to generate more revenue by harnessing the mobile platform, as more and more users rely on smartphones to access the Internet.

Deutsche Bank estimated 4 billion people would be accessing the Internet on smartphones in 2017, with spending on global mobile advertisement set to reach $70 billion by the same year.


Facebook, which completes a decade in business next week, ended 2013 with 1.23 billion monthly active users.

Analysts identified the company’s new photo-sharing service, Instagram, as well as a new video ad format and its social search feature, dubbed as graph search, as the next big areas of growth for Facebook.

Facebook launched its first ads for Instagram during the quarter just ended, and has also started testing video ads with brand marketers.

“We continue to see two major catalysts in Instagram and video ads, which could be FB’s next billion-dollar business,” Jefferies analysts wrote in a note.

Wall Street has been counting on video ads to open up a potentially lucrative market as Facebook tries to sustain its rapid growth. This market is considered crucial for Facebook’s market valuation, and poses a potential long-term threat to traditional TV networks.

Zuckerberg has enlisted Samsung Electronics Co Ltd, Qualcomm Inc and other technology companies to help him in a project aimed at making Internet access affordable for people not already online.

One area of concern to Facebook has been that teenage users might be drifting to new messaging services, such as Snapchat and WhatsApp.

After spooking some investors in October by saying it had noticed a decrease in daily users among younger teens, Facebook did not disclose teen usage data for the fourth quarter.

“The company’s Messenger product grew users 70 percent in the last three months and we think this could potentially help re-engage teens over time,” JPMorgan analyst Doug Anmuth said.

(Additional reporting by Chandni Doulatramani; Editing by Robin Paxton and Saumyadeb Chakrabarty)

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To sell more, BofA turns to existing clients

(Reuters) – Bank of America Corp (BAC.N) is trying to solve one of the most difficult problems that big banks face: convincing reluctant employees to sell more products to current customers, who are themselves reluctant to buy them.

The bank says that in at least one part of its operations, namely administering 401(k) plans and related accounts for companies, it is making real progress. It attributes its success to pay incentives, working harder to zero in on the right clients, and training specialist sales staff.

In terms of the number of plans, it sold nearly three times more to clients in 2013 than it did a year before, said Bank of America spokesman Matthew Card. In the first year that it tried to attract existing banking clients of all sizes, the bank won 750 new retirement plans compared with the 263 plans it won in 2012.

“We set aggressive goals and this year for 2013 they hit all the goals,” chief executive Brian Moynihan said on a January 15 conference call with analysts, referring to the business.

By other measures, its progress in selling retirement services has been halting. It won $14 billion of assets from existing clients last year, up just a touch from 2012’s $13.9 billion.

Most of the 2013 growth came from selling smaller plans to smaller companies. The bank won 470 plans from these clients in 2013 compared to 70 in 2012.

Selling these services is complicated, but Bank of America’s efforts are also critical as the second-largest U.S. bank tries to increase its revenue. It has a vast customer base – serving one out of every two U.S. households, for example – making it tough to win new customers. Instead, the bank under Moynihan is trying to win more revenue from existing clients, a practice known as “cross-selling.”

For decades, banks have tried to cross-sell customers everything from insurance to wealth management in the hopes of boosting sales. What they often find is, employees used to selling one kind of product struggle to sell something different, and setting up systems to facilitate cross-selling can take some time.

“It’s better than it used to be,” said one veteran Merrill Lynch broker of the process to sell more retirement services to current clients. “It used to be like the Wild West where you just started chasing companies for 401(k) business. Prospects got pissed because they had six different people talking to them.”

To see how the bank’s efforts may be bearing fruit in these kinds of services, consider the way it won business from a tour bus company in Hawaii that was already a banking customer.

Mark Perry, a regional executive at the global commercial bank based in San Francisco, said some of his bankers pitched the company on what products they could offer. Then a group of brokers from the bank’s Merrill Lynch wealth management unit paid a visit to the bus company’s offices to educate employees on crafting and meeting their retirement and investment goals. They sealed the deal.

Bank of America is behind rivals in the retirement plan business by some metrics: it administered $103.9 billion in defined-contribution benefit plan assets in 2012, less than JPMorgan Chase Co (JPM.N) and Wells Fargo Co (WFC.N), according to data from Cerulli Associates.

Overall, the financial benefit plan business is responsible for more than $1 billion in annual revenue for the bank. It is impossible to tell how much the bank’s efforts at cross-selling are boosting the bottom line in this business, but Bank of America officials say that income from servicing retirement plans helped propel both revenue and profitability at the bank’s global wealth and investment management division to record levels in 2013. The division accounts for around 21 percent of the entire company’s revenues.


Kevin Crain, Bank of America’s managing director in retirement and benefit plans services, has been working for years to figure out how to convince bankers to sell his product.

In 2010, Crain asked bankers to refer all mid-sized clients to his division that might be a good fit. His group soon found itself flooded with referrals “that didn’t have a whole lot of life to them,” he said. Crain also heard complaints from bankers that were hesitant to entrust their clients to different people at Bank of America.

Then, Crain decided instead to get more focused. He designated around 125 to 150 Merrill Lynch retail brokers to work directly with the bankers in presenting Merrill’s retirement capabilities to clients.

Brokers took an added interest in selling companies’ retirement plan because when employees switch jobs they often look for a broker to help them roll over money they have in a 401(k) account into another type of savings plan, Crain said.

To encourage commercial bankers to buy into the strategy, a component of their pay started to be based on the total revenue a client brought to Bank of America. Retirement plans provide a very good revenue stream that will naturally grow each year once the plan is sold, so “a banker takes an interest in that,” Crain said.

The brokers would sit down with bankers to target businesses that lie within Bank of America’s “sweet spot,” Crain said. Those companies usually had plans ranging from about $5 million to $50 million of assets, and they usually had many different types of plans, like 401(k)s and health savings accounts, for which they only wanted one administrator. That gave the bank a shot at multiple sources of revenue.


Cross-selling is particularly thorny when it comes to bankers that deal with businesses. A lender might have a relationship with a company’s treasurer or chief financial officer, but decisions about other products, such as retirement plan services, might be made by other officials, such as heads of human resources. The banker must then get to know someone new at the company.

“Just because you have a good relationship with one part of a client, it doesn’t always transfer to the ability to gain mindshare with other parts of that organization,” said Derek De Vries, a bank analyst at UBS Investment Research.

(Reporting by Peter Rudegeair, additional reporting by Jed Horowitz, editing by Dan Wilchins and Andrew Hay)

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Ford to boost large truck production at Kentucky plant

DETROIT (Reuters) – Ford Motor Co (F.N) is spending $80 million to boost production of large pickups and SUVs this year at its Louisville truck plant, the U.S. automaker said Thursday.

The Kentucky facility, one of two Ford plants in Louisville, last year built 353,662 vehicles. Most of those were Ford’s popular F-Series Super Duty, a bigger, brawnier sibling to the company’s mainstay F-150 pickup.

The truck plant, which opened in 1969 and has been running close to its rated annual capacity of 365,000, will hike that by 55,000 to 420,000, Ford said. The plant will add 350 jobs to its current workforce of nearly 4,000.

Ford did not provide further details about the timeline of the expansion plans.

The F-Series Super Duty accounted for the bulk of production last year in Louisville, at 272,521, according to data from Automotive News. The plant also built 78,500 Ford Expedition and Lincoln Navigator SUVs.

The standard F-150 is being redesigned late this year, with most of its steel body panels being replaced with lighter-weight aluminum.

The Super Duty pickups aren’t slated for a major overhaul until late 2015 when they, too, are expected to feature more aluminum.

The Expedition and Navigator SUVs will be restyled and updated this fall for the 2015 model year. They sell in much smaller numbers than the Super Duty, which includes the F-250, F-350, F-450 and F-550 pickups. Many of those trucks are purchased by commercial users, including construction workers and small-business owners.

The mildly revised 2015 F-Series Super Duty goes on sale this spring, with a more powerful 6.7-liter V8 turbo-diesel engine and greater towing capacity.

Ford does not break out sales of the Super Duty models from the standard F-Series. The full line continues to be the best-selling vehicle in the U.S., with sales last year jumping 18 percent to 763,402.

Expedition sales in 2013 rose 1 percent to 38,350 in 2013, while Navigator sales increased 3 percent to 8,613.

(Reporting by Paul Lienert in Detroit; Editing by Meredith Mazzilli)

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