Apple boss Tim Cook rejects $75m payout

Apple's boss Tim Cook has turned down a payout worth about $75m (£48m).

The technology giant will pay a quarterly dividend of $2.65 per share from July, the first time Apple has declared a dividend since 1995.
But a regulatory filing with the Securities and Exchange Commission revealed that Mr Cook will not take up his dividends.

 

Mr Cook is said to be the highest paid CEO in the US

 

A newspaper recently said that Mr Cook was the best-paid boss in the US with an income of more than $300m.

"At Mr Cook's request, none of his restricted stock units will participate in dividend equivalents," the filing said. It did not say why.

 Talent

According to the Wall Street Journal, Mr Cook made $378m last year, most of which came from a grant of one million shares awarded.
His base salary is $900,000. His predecessor, Steve Jobs, famously had an annual salary of $1.
Earlier this week, Apple's lead designer Jonathan Ive was knighted.
The Briton - responsible for the designs behind iconic products like Apple's iPod, iPhone and iPad - also reaffirmed his desire to stay at the company.
Since the death of Jobs, the Apple co-founder and figurehead, many have speculated that the company might struggle to maintain its reputation for innovative products and would face an exodus of top talent.
That has not happened yet as Apple has sought to lock in people like Mr Cook and Sir Jonathan through long-term stock options.
Apple has about $110bn in cash. In March, the tech giant said it would use its cash to start paying a dividend to shareholders and to buy back some of its shares.
It expects to use $45bn over the next three years.
Earlier this year, Apple's shares touched a high of $644, surpassing $600bn in market value and making the company the world's most valuable firm.
Since then, Apple shares have dropped to $562 each, making the company worth $525bn.

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Spain's Bankia seeks 19bn-euro bailout from government

Spain's fourth-largest bank, Bankia, has asked the government for a bailout worth 19bns euros ($24bn; £15bn).

• Formed in December 2010 from merger of seven troubled banks
• Most toxic assets moved into holding company BFA
• Listed on the Madrid stock exchange in July 2011
• Chairman Rodrigo Rato resigned earlier in the month before Bankia was part-nationalised

 Bankia also restated its results - now saying it made a 2.98bn-euro loss for 2011 rather than the 309m euros in profit it announced in February.

Earlier on Friday, trading in Bankia shares was suspended on the Madrid stock exchange while its management put together a restructuring plan.
Bankia has already been bailed out because of its bad property loans.
After a meeting of the board on Friday, Bankia's parent Banco Financiero y de Ahorro (BFA) asked Spain's bank bailout fund, FROB, to inject the 19bn euros.
Bankia will then issue 12bn euros in capital that will be underwritten by BFA.
The bank said that the "recapitalisation measures strengthen the group's solvency, liquidity and stability".
Rating agency Standard and Poor's has also lowered the credit rating of Bankia and four other Spanish banks.

Partly-nationalised

Two weeks ago, Bankia had a 4.47bn-euro loan by the Spanish bailout fund converted into a 45% stake in the bank.
Bankia had to reassure its savers last week that their money was safe after a Spanish newspaper reported a run on the bank.
Bankia was created in 2010 from the merger of seven struggling regional savings banks. It holds 32bn euros in distressed property assets.
Its shares fell 7.4% on Thursday to close at 1.57 euros, which is 58% down from their listing price in July 2011.
There have been four attempts by Spanish governments to shore up the banking system since the global banking crisis of 2008.
As part of the latest plan, lenders are having to make 30bn euros of extra provisions to cover potential losses on property loans, which comes on top of 54bn euros they were ordered to set aside in February.

Regional trouble

The health of Spain's banking system is key to whether the country eventually needs to seek a bailout itself from the eurozone and the International Monetary Fund.
Spain's credit rating was downgraded by S&P last month on the basis that it would probably have to take on more debt to support its banks.
Also on Friday, there were appeals for help from another Spanish institution - its wealthiest autonomous region, Catalonia.
"We need to make payments at the end of the month," said Catalan president Artur Mas. "Your economy can't recover if you can't pay your bills."
Catalonia represents one-fifth of the Spanish economy.
It has to take out 13bn euros of loans this year to refinance maturing debt, not to mention funding whatever deficit it has for the current year.
The regions have been having trouble borrowing money commercially, so the central government has given them a special credit facility from the Official Credit Institute (ICO).
Those credit lines run out in June and the government has said it will come up with a new mechanism to provide credit for the regions, but it is unclear what form the help should take.

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Eurozone biggest threat to global outlook, OECD says

The eurozone crisis is the single biggest threat to the global economy, according to the Organisation for Economic Co-operation and Development.

 

The crisis in the eurozone has been on the radar for some time

The economy of the 17 nations that use the euro will shrink 0.1% this year, before rebounding to 0.9% growth next year, the OECD predicts.

By contrast, the US economy will expand by 2.4% this year and 2.6% in 2013.

The OECD also seemed to back calls by some Europeans to combine spending cuts with measures to boost growth.
"The crisis in the eurozone remains the single biggest downside risk facing the global outlook," said OECD chief economist Pier Carlo Padoan.

In November last year, the organisation warned of a "deep recession with large negative effects for the global economy" if the eurozone did not tackle the crisis.

On Tuesday, it said: "The immediate dangers of such developments have receded somewhat since last autumn, although... the dangers have not disappeared.

"Failure to act today could lead to a worsening of the European crisis and spillovers beyond the euro area, with serious consequences for the global economy."

The OECD predicted that the UK would grow by just 0.5% this year and by 1.9% in 2013. This comes after figures showed that the UK had returned to recession in the past two quarters.

'Growth-friendly'

Ahead of an informal summit of European Union leaders in Brussels on Wednesday, the OECD seemed to back calls from the new French president to enact measures such as "increasing European Investment Bank funding for infrastructure projects".

It also said that "better use" could be made of the European Central Bank's balance sheets and called for "a further easing in the euro area".

"Fiscal consolidation and structural measures must proceed hand in hand, to make the adjustment process as growth-friendly as possible," the OECD said.

The organisation expects the unemployment rate to stay high in the euro area - 10.8% this year and above 11% next year.

The jobless rate is currently 10.9%, the highest since the euro was formed in 1999.

Mr Padoan also noted the backlash against austerity measures across Europe, which has seen street protests and led to the election of Francois Hollande.

In elections earlier this month, the majority of Greeks voted against those parties backing the drastic austerity measures that had been agreed with the EU.

"Elections in a number of euro-area countries have signalled that reform fatigue is increasing and tolerance for fiscal adjustment may be reaching a limit," he said.

"Rising unemployment and social pain may spark political contagion and adverse market reaction", with countries outside the euro also at risk of being hit, he added.

The OECD is an organisation that consists of 34 countries, including the US and Western European nations.

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Facebook shares spike on stock market debut

    Mark Zuckerberg rings the Nasdaq bell as Facebook shares go on sale

Facebook shares jumped more than 10% within minutes of making their stock market debut on the Nasdaq exchange.


Shares in the social networking site rose to $42, having been initially priced at $38 each, before falling back to trade flat.
Mark Zuckerberg, 28, who started Facebook while at university, remotely opened trading on the Nasdaq earlier.
He appeared via a video link from a celebration at the firm's headquarters in California.
There had been a delay of about half an hour in the start of trading in Facebook shares, which analysts say reflected the huge demand for the stock.
The $38 initial share price values the eight-year-old social network site at $104bn (£66bn).
Strong demand had led the company to increase both the price and the number of shares available for sale.
Facebook's owners are releasing just under a fifth of the company's total shares, about 421 million, which could raise about $18bn.

Advertising strategy

The site is largely used for social updates, and although Facebook has said its use on mobile devices are the key to new profits, analysts question how much room there is for advertising on such platforms.

Car giant General Motors added to those doubts by saying on Tuesday that it would no longer pay to advertise on the site.
Online strategy consultant Atul Chitnis told the BBC that the question was whether Facebook had a strategy to bring advertisers in.
"My belief is that Facebook does have a strategy, they are ready with something they have not yet talked about," he said. "How effective it is we will have to watch and see."

Major flotations

• Google: raises $1.67bn for 7% of the company in 2004
• Rosneft: raises $10.4bn for 15% of the company in 2006
• Visa: raises $19.1bn for 50% of the company in 2008
• Agricultural Bank of China: raises $22.1bn in 2010 making it the world's largest IPO to date

He also said he expected to see a "brief burst" of the share price going up and then "sinking again" in a couple of days.
Facebook's valuation means the social network site is worth about the same as internet shopping giant Amazon, and more than the value of stalwarts such as Disney.
The initial public offering (IPO) of the shares is the third-largest in US history, after the financial giant Visa and General Motors.
Facebook employees had been up all night ahead of the event, taking part in a "hackathon" at the company's headquarters in Menlo Park, California.
It is an event in which programmers work on projects and come up with new ideas.

Profits and privacy concerns
 

Is Facebook worth $100bn?

Facebook's profits are tiny in relation to its size - it makes about $5 a year for each of its 900 million users - and its plans to increase profitability are unclear.
Oliver Pursche, president of Gary Goldberg Financial Services, told the BBC ahead of the flotation: "We're telling our investors to hold off.
"Number one, we don't know what the guts and the balance sheet of the company looks like yet so that's a big red flag for us. We want to understand the business before we tell people to invest."
Facebook also faces concerns over privacy.
Indeed, on Friday a class action suit was brought against the company in the US for "improperly tracking the internet use of its members even after they logged out of their accounts".
Facebook itself has previously warned about the possible impact of evolving legal protections across the world on consumer privacy, and specifically a revision to the European Union's privacy laws.

 Mixed experiences
 
Other internet companies have had mixed experiences when they have started selling shares.
Online games maker Zynga's shares fell 5% on their first day of trading in December 2011.
But shares in business networking site LinkedIn more than doubled on their debut in May last year and are still trading well above that level, while Groupon shares jumped 30% on their debut in November.
However, they have since fallen back, particularly after the daily deals firm admitted in April that it had overstated its previous revenues and earnings.
Facebook's flotation had an immediate impact on the value of these companies, as their share prices fell at the same time as Facebook's fell back from its initial spike.
Groupon dropped 5.6%, LinkedIn fell 1.2%, while shares in Zynga were suspended after plunging more than 13% in a matter of minutes.

Voting power
 
The new Facebook shareholders will not have much say in how the business is run.
The shares on offer are "A" shares, which carry one vote per share, as is normal, but the current owners' shares are "B" shares, which carry 10 votes each.
They will control more than 96% of the votes after the flotation, with founder Mark Zuckerberg holding just under 56% of the voting power of the company.
Mr Zuckerberg, who owns about 25% of the company, stands to gain the most from taking Facebook public. Fellow founders Dustin Moskovitz and Eduardo Saverin will also become paper-billionaires overnight, as will Napster founder and former employee Sean Parker.
US venture capital firm Accel Partners and Russian internet investment group Digital Sky Technologies also hold significant stakes in Facebook, while software giant Microsoft and U2 frontman Bono also stand to make a huge profit on their investment in the company.

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Facebook sets share price in $100bn flotation

Facebook has priced its shares ahead of one of the most eagerly-anticipated share flotations in recent stock market history.

                 Facebook founder Mark Zuckerberg met investors in New York in the run up to the flotation

The social network said on Thursday  that it valued shares at $38 (£24) each, and that its shares would begin trading in New York on Friday.
At this price the eight-year-old firm would be worth $104bn.
Demand is set to be high; earlier this week Facebook said it would be selling 25% more shares than planned.
But questions remain about the firm's ability to generate profits and take advantage of mobile phone platforms.
There are also concerns that once the company has to answer to shareholders, there may be a greater emphasis on advertising to generate profits.
Limited say Earlier this week, the company indicated the price would be between $34-$38 a share, with about 421 million shares up for sale.
This would represent one of the highest value share sales, or initial public offerings (IPOs) in US history.
By selling shares at that value, Facebook raised $16bn for itself.

However, the new shareholders will not have much of a say in how the company is run.

The shares on offer are A shares, which carry one vote per share, whereas the current owners' shares are B shares, which carry 10 votes each.
They will control more than 96% of the votes after the public listing, with founder Mark Zuckerberg holding just under 56% of the voting power of the company.
Mr Zuckerberg, who owns about 25% of the company, stands to gain the most from taking Facebook public. Fellow founders Dustin Moskovitz and Eduardo Saverin will also become paper-billionares overnight, as will Napster founder and former employee Sean Parker.
US venture capital firm Accel Partners and Russian internet investment group Digital Sky Technologies also hold significant stakes in Facebook, while Microsoft and U2 frontman Bono also stand to make a huge profit on their investment in the company.
Revenue growth The social networking site has transformed the way in which hundreds of millions of people around the world communicate. It is also transforming the way companies advertise to existing and potential customers.
But Facebook's 900 million users helped the company generate just $1bn in profit last year, and there are concerns about its ability to grow profits in the future.
For while it holds a depth of personal information advertisers dream about, Facebook only generates about $5 a year per user.
This has led a number of commentators to question the company's valuation.
"Facebook will need to generate annual revenue of $30bn-$40bn in order to justify the likely valuation of the business," said Victor Basta at Magister Advisors.

"This is a tenfold increase over the revenues that it currently generates. The question is 'where from?'".
The potential revenue from online advertising is huge.
"We know our industry is $1tn worldwide," Martin Sorrell, chief executive of advertising giant WPP, told the BBC.
"We know internet advertising is currently 20% roughly [of the total]. We know people are spending almost a third of their time online in one way or another, so there's a vast opportunity for Facebook."
Generating greater revenues from this potential market is the first key challenge facing the company, both in terms of its own business model and in the face of strong competition from the likes of Amazon, Apple and Google.
"We're telling our investors to hold off," Oliver Pursche, president of Gary Goldberg Financial Services, told the BBC.
"Number one, we don't know what the guts and the balance sheet of the company looks like yet so that's a big red flag for us. We want to understand the business before we tell people to invest."
'Knife edge' Facebook has identified mobile devices, phones and tablet computers as key areas for revenue growth, but observers say this will not be easy.
"[Facebook is] the holy grail for advertisers. It holds the minutiae of everybody's lives, the perfect concoction of information - age, sex and what you like," technology analyst Ernest Doku told the BBC.
"[But] so many people are engaged for so long, it's very difficult to lure them away to what you're trying to sell them."
The second big challenge is not alienating users while trying to maximise revenue.
"[The company] is balancing on a knife edge between servicing its users and pleasing its investors," Mr Doku said.
"It has been able put the user experience first and foremost, but now investors are going to want [a return]."

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Spanish banks have credit ratings cut by Moody's

Ratings agency Moody's has cut the credit ratings of 16 Spanish banks, a further blow to a country that is struggling to deal with the bad debts of its banking sector. 

 Bankia shares have fallen 50% in May

It also cut the debt rating on Santander UK, a subsidiary of the Spanish banking giant.
It comes after shares in struggling lender Bankia fell another 14%. They have almost halved in value this month.
Fears about losses at Spanish banks has hit shares across Europe.
The banks include Banco Santander and BBVA, the biggest banks in Spain. Ten of the 17 banks were also put on negative credit watch, meaning that further downgrades are possible.
"The change to Moody's credit rating of Santander UK plc has no impact on our businesses in the UK or our plans for future growth," Andy Smith, a spokesman at Santander said about the downgrade.
"Santander UK plc is an autonomous subsidiary of the Santander Group, with more than 90% of its total assets held in the UK and a eurozone sovereign exposure of less than 1% of assets."

In cutting the ratings, Moody's cited the "adverse operating conditions, characterised by the renewed recession, the ongoing real-estate crisis and persistent high levels of unemployment".

It also said that the Spanish government, due to its borrowing difficulties, has had its ability to provide support to the banks "reduced".
The Spanish government also had to pay higher rates of interest to borrow money on the markets, which leads some to believe it will need a bailout.
Moody's also cut the ratings of four of Spain's regions - Catalonia, Murcia, Andalucia and Extremadura - of whom it said there is only a "low probability that the regional governments will be able to meet the 2012 deficit target".

'Basically normal'

Bankia was forced to deny a report customers had taken 1bn euros ($1.3bn; £800m) out of the bank, which is set to be part-nationalised, in the past week.
Spain's economy minister denied reports of a surge in withdrawals from Bankia in recent days.
"It's not true that there is an exit of deposits at this moment from Bankia," said Fernando Jimenez Latorre.
Later, the bank's chief executive said volumes had been "basically normal".
Bankia, which holds 32bn euros (£25.7bn) in distressed property assets, was partly nationalised this month. On Wednesday, it said it was delaying the release of its first-quarter results.
It has the industry's largest exposure to the property market, which burst spectacularly and has saddled its banks with bad debt.
"Markets are worried about eurozone bank deposit runs and an escalating banking crisis," said VTB Capital economist Neil MacKinnon.

Alberto Gallo, head of credit research at Royal Bank of Scotland, told the BBC: "The problem is Spanish banks are too large for the government to bear all of their weight.

"You [the Spanish government] need to make a choice and just protect stronger banks, otherwise Spain will go the way of Ireland - having to do a lot of austerity and potentially incurring losses for bank bondholders."
Earlier, the Spanish government raised 2.5bn euros through issuing a number of different types of bonds.
On bonds due to be paid back in January 2015, it had to pay an interest rate of 4.373%, up from 2.89% in April. Governments have to pay higher returns to investors, or yields, as lenders become more concerned about a country's ability to pay the money back.
On Wednesday, Spain's Prime Minister Mariano Rajoy warned that borrowing costs could become "astronomical" as fears about the weakness of its banks persist.

 

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China allows banks to lend more in bid to boost economy

China has cut the amount of funds banks have to hold in a reserve, in a bid to boost its economy.

 

China is boosting its economy by cutting the amount of reserves banks have to hold

It is the third time the central bank has made such a move in six months.
It follows recent economic data suggesting that the Chinese economy is slowing down. In April industrial output growth slowed to 9.3% - the slowest rate since 2009.
The People's Bank of China says banks will have to hold half a percentage point less in reserve.
For the nation's biggest lenders it means they will have to hold 20% of their assets in cash reserves.
The move should free up banks to lend billions of yuan.
China's economy has been slowing for more than a year. In the first quarter of 2012 it grew 8.1% compared with 8.9% in the fourth quarter of 2011.
Meanwhile, China has agreed to launch negotiations for a free trade pact with Japan and South Korea.
The agreement came at a summit in Beijing.
China is already the most important trading partner for Japan and South Korea.

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JPMorgan reveals shock $2bn trading loss on investments

JPMorgan Chase, the biggest US bank, has revealed a surprise trading loss of at least $2bn (£1.2bn) on complex investments made by its traders.

 

JPMorgan's chief executive Jamie Dimon said "many errors" were made

Chief executive Jamie Dimon blamed "errors, sloppiness and bad judgement" for the losses and warned "it could get worse".
The risky hedging strategy could cost the bank an additional $1bn, he added.
JPMorgan shares dropped 7% in after-hours trading, and other bank shares also fell.
Goldman Sachs, Citigroup and Bank of America suffered heavy losses in electronic trading after the market close on Wall Street.
Shares in European banks were also affected, with Barclays falling 2.85%, Deutsche Bank down 2%, and BNP Paribas 2.6% lower.
'Self-inflicted' Overall, after accounting for other gains, losses at JPMorgan's chief investment office (CIO) are estimated to come in at $800m in the second quarter.
The strategy taken at the CIO unit, run by Ina Drew in New York and Achilles Macris in London, had been "riskier, more volatile and less effective" than previously believed, Mr Dimon said.
"These were egregious mistakes," he said. "They were self-inflicted and this is not how we want to run a business.
"It could get worse", he warned. "This could go on for a little bit."

'Moving on'

The CIO is an arm of the bank used to make broad bets to hedge its portfolios of individual holdings. Hedging is an investment practice used to reduce the risk of price fluctuations to the value of an asset.

Attention has focused on the activities of Bruno Michel Iksil, a London-based JPMorgan trader known as the London Whale, who reportedly made big bets on the financial markets as part of this hedging strategy.
But a source close to the bank told the BBC: "We're not talking about a rogue trader here. His was one trade in a big portfolio of trades. It was a global hedging strategy known by the bank but executed poorly. It failed."
The trading loss, revealed in a regulatory filing, is expected to hurt JPMorgan's overall earnings in the quarter, and will come as an embarrassment to the bank.
It had emerged from the 2008 financial crisis in much better health than many of its rivals after avoiding risky investments that had hurt others.
"We will admit it, we will learn from it, we will fix it, and we will move on," Mr Dimon said.
He added that the bank was trying to unload the portfolio in question in a "responsible" manner in order to minimise the cost to shareholders.

Too big to fail

Mr Dimon said the type of trading that led to the loss would not be banned by the so-called Volcker rule, designed to censure certain types of trading by banks with their own money.

But he acknowledged that the errors would be particularly embarrassing, given his public criticism of the Volcker rule.
"It plays right into the hands of a bunch of pundits out there, but that's life," he said.
Prof Mark Williams from Boston University, and a former Federal Reserve regulator, said taxpayers should be concerned about these trading losses.
"Taxpayers ultimately have to bail out these 'too big to fail' banks. And that's what JPMorgan is - it is too big to fail," he told BBC World Service radio.
"How could a bank that's supposed to be the premier bank in setting the leadership role allow such risk taking?"

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