Shrinking Bank Revenue Signals Dawn of ‘Worst’ Growth Decade
Shrinking revenue at U.S. banks, led by Goldman Sachs Group Inc. and Citigroup Inc., may continue to fall as the industry heads into what could be its slowest period of growth since the Great Depression.
After the six largest U.S. banks posted record revenue in 2009, combined net revenue fell by an average of 8 percent in the third quarter from a year earlier and 16.3 percent over the last two quarters, according to data compiled by Bloomberg.
Revenue so far this year is down by 4.1 percent, driven by declines in everything from trading at Goldman Sachs to home lending at Bank of America Corp. New laws restricting account and credit-card fees, as well as derivatives and capital rules, are also squeezing lenders.
Next year will kick off a decade that will bring the "worst revenue growth" for U.S. banks in 80 years, according to Mike Mayo, a banking analyst at Credit Agricole Securities USA Inc. in New York.
"Revenues aren’t just weak for this quarter, or even for this upcoming year, but for the entire upcoming decade," said Mayo. For details on these projections from Bloomberg, please click here.
AIG Says Benmosche Has Cancer, Undergoing Treatment
Robert Benmosche, chief executive officer of American International Group Inc., said he was undergoing treatment for cancer and remained committed to repaying the insurer’s $182.3 billion taxpayer bailout.
Benmosche, 66, began an "aggressive round of chemotherapy" last week, he told employees yesterday in a letter. The New York-based insurer’s board began preparing for a successor before disclosing Benmosche’s condition because the chief intended to retire in 2012, he told staff.
"While I have every intention of staying on that timetable, it’s important that we prepare for any alternate plan that fate may have in mind," Benmosche said in the letter. "As for my long-term prognosis — I will have a better idea over the next couple of months of what that will look like as I continue to undergo treatment and my doctors refine their diagnosis."
Benmosche has presided over a 37 percent rise in AIG’s stock this year as he announced deals to sell businesses and repay taxpayers by converting a $49.1 billion Treasury Department preferred stake into common stock. The former MetLife Inc. CEO clashed with regulators after starting at AIG in August 2009 and has since been credited for stabilizing credit ratings and hiring top managers.
For more about this story from Bloomberg, please click here.
Office Depot CEO to Resign
Office Depot Inc. Chief Executive Steven Odland has agreed to step down, after a controversial five-year reign at the office- supplies company. The decision was a mutual one between the 52-year-old Odland and the board, Office Depot said.
Odland’s tenure was overshadowed by a federal investigation that began in 2007 related to government allegations of leaking financial information to analysts in violation of Regulation FD, which prohibits selective disclosure of such information. The Securities and Exchange Commission also looked into vendor payments and other accounting issues.
For more from The Wall Street Journal about Odland stepping down, please click here.
Study Shows Tech Executive Pay on the Mend
Non-founding tech executives’ average base salaries rose 3.3 percent from 2009 to 2010, according to The CompStudy—completed by the executive search firm J. Robert Scott, Ernst & Young, and academics at Harvard University.
That’s an improvement from last year, when the annual raises that tech executives got were almost non-existent, in large part because of the poor economy.
Among chief executives in the study, non-founding tech CEOs pulled in an average base salary of $235,000 in 2010, up from $230,000 last year. And non-founding life sciences chief executives saw their salaries rise from $277,000 to $288,000.
While founding CEOs made less than non-founders, according to the study, their equity stakes in their companies far exceeded those of chief executives who joined companies after they were launched. In tech, founding CEOs controlled 33.6 percent of their firm’s stock on average, compared with 6.4 percent among the non-founding set. From founder to non-founder CEOs in life sciences, the difference was less stark: 19.5 percent and 5.5 percent, respectively. For more from xconomy about the study, please click here.