Dimons Turnaround, MGMs Wrong-Way Bid, LSEs Retreat: Timshel
Commentary by David Wilson
Jan. 17 (Bloomberg) — Jamie Dimon is approaching the 10th
anniversary of his ouster from Citigroup Inc., the largest U.S.
bank by assets. Theres a new reason for shareholders to regret
his absence.
JPMorgan Chase %26amp; Co., where the 51-year-old Dimon has been
a top executive for the past 3 1/2 years, supplanted Citigroup
yesterday as the countrys second-biggest bank by market value.
His New York-based company finished the day at $139.5 billion,
taking a 6.5 percent lead.
The ranking change stemmed from a rebound in JPMorgans
shares, which gained 5.8 percent after fourth-quarter earnings
took less of a hit from subprime-related holdings than analysts
expected. They had fallen 5.3 percent a day earlier.
JPMorgan cut the value of investments tied to subprime
mortgages, or loans made to less-creditworthy home buyers, by
$1.3 billion. William Tanona, an analyst at Goldman Sachs Group
Inc. in New York, projected $3.4 billion three weeks earlier.
The figure compared even more favorably with Citigroups
$18.1 billion writedown, reported the day before. That expense
saddled the bank, also based in New York, with a fourth-quarter
loss of $9.83 billion. JPMorgan had $2.97 billion in net income.
Citigroups shares dropped 9.7 percent during the past two
days, reducing the companys market value to $131.1 billion. At
yesterdays close, the stock was 8.5 percent below the price of
Travelers Group Inc., its immediate predecessor, in April 1998
when that company and Citicorp said they would combine.
Stock-Market Leadership
Dimons stint at Citigroup ended almost as soon as it
started. He lost his job as president in November 1998, less
than four weeks after the merger was completed, in a shakeup
that followed a $1.33 billion trading loss.
The departure severed his professional relationship with
Sanford Weill, Citigroups architect, whom he had served since
1982. After 16 months out of the banking industry, he returned
as Bank One Corp.s chairman and chief executive officer.
JPMorgan bought Bank One in July 2004, and Dimon spent the
next 17 months as its president. He succeeded William Harrison
as CEO at the end of 2005, six months earlier than originally
planned, and added the chairmans title a year later.
Since Dimon arrived at JPMorgan, its shares have beaten
Citigroups every year. The most lopsided victory was recorded
last year, when the stock dropped 9.6 percent as Citigroup lost
almost five times as much.
$127 Billion Decline
JPMorgan backed into its second-place ranking, behind Bank
of America Corp., among U.S. banks. Its market value has fallen
from a high of about $182 billion, reached in May, according to
data compiled by Bloomberg.
Citigroups value, which peaked at about $278 billion in
December 2006, fell $127 billion last year as subprime losses
mounted. The company has since raised $22 billion from outside
investors through preferred-stock sales and is seeking at least
$2 billion more. Weill and his foundation are among the buyers.
These new investors, along with the owners of Citigroups
common shares, have reason to be envious of Dimons performance
at JPMorgan and his companys new-found standing.
* * *
When a companys stock price falls, would-be buyers tend to
reduce their bids. MGM Mirage, the casino operator controlled by
billionaire Kirk Kerkorian, and its partner in a tender offer
did the exact opposite.
MGM Mirage and Dubai World, an investment arm of Dubais
government, announced Jan. 9 that they would buy shares of the
Las Vegas-based company for $75 to $80 apiece. Yesterday, they
disclosed an amended bid with a fixed price: the upper end of
the earlier range.
The stock initially rose after the first offer and then
retreated, falling 5 percent by the time of the revision. Its
Jan. 15 closing price of $66.47 was the lowest since Tracinda
Corp., Kerkorians holding company, said in May that it might
sell its 51 percent stake.
At $80, the new bid is 1.5 percent higher than MGM Mirages
average market price during the preceding 12 months, Bloombergs
data shows. MGM Mirage and Dubai World also increased the number
of shares they plan to purchase by 50 percent, to 15 million.
* * *
London Stock Exchange Group Plcs shares are off to the
years worst start among European financial markets. The views
expressed by the newest brokerage analyst to cover the company
raise the possibility of further declines.
The LSE has lost 18 percent, about two percentage points
more than Hellenic Exchanges SA, its closest competitor. The
retreat includes a 5.7 percent decline yesterday after Dirk
Hoffmann Becking, a London-based analyst with Sanford C.
Bernstein %26amp; Co., recommended selling the stock.
“Competitive pressures among European stock markets may
prevent the exchange from meeting analysts earnings estimates
for this year and next, Hoffmann-Becking wrote in his first
report. He rated the exchanges shares “underperform.
The LSE has erased most of a 36 percent gain since Sept.
20, when investments in its shares were announced on behalf of
Dubai and another Persian Gulf emirate, Qatar. Yesterdays close
of 1614 pence was 0.8 percent above the analysts price estimate
for the next six to 12 months.
(David Wilson is a Bloomberg News columnist. The opinions
expressed are his own.)
To contact the writer of this column:
David Wilson in New York at
