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Banking Woes Worsen in Third Quarter, FDIC Says; Telkom and Vodafone Talks End; Acorn Falls in Third Quarter; International Hits Now Low on Sour 3Q Numbers; Porsche Sales Accelerate; Macquarie, MBK Tune in on Korean Cable TV Firm
- Net income in the U.S. banking industry was down nearly 25% in the third quarter and loan-loss provisions were at their highest level in more than 20 years, the Federal Deposit Insurance Corp. said in a report released yesterday (Wednesday). The FDIC report said the ongoing credit crisis spawned by the subprime mortgage mess has had a dramatic, negative impact on the U.S. banking business. Net income for the industry for the quarter plunged 24.7% to $28.7 billion, The reported. Approximately 4,000 federally insured banks and thrifts reported that third-quarter earnings declined compared to 2006. Provisions for loan losses totaled $16.6 billion, the largest amount since the second quarter of 1987. Loans and leases classified as "non-current" rose 23.8%. Residential real estate loans alone that were behind at least one payment rose by $7.5 billion in the three-month period. "Industry performance was hit by asset quality problems and volatility in financial markets across the board," FDIC Chairwoman Sheila Blair said.
- South African telephone company Telkom SA Ltd. (TKG) announced yesterday (Wednesday) that talks with MTN Group Ltd. and Vodafone Group Ltd. (VOD) over the sale of its fixed-line assets and stake in Vodacom had ended, Bloomberg reported. Vodafone already owns 50% of Vodacom, and was hoping to obtain a majority stake in Vodacom, South Africa's largest cellular operator. However, the sale was contingent upon a merger of fixed-line assets between Telkom and MTN. "As discussions with Vodafone regarding Telkom's investment in Vodacom were subject to agreement being reached with MTN, Telkom shareholders are advised that discussions with both MTN and Vodafone have been terminated," Telkom said in a statement. "This decision was driven primarily by matters related to the anticipated costs and benefits of the implementation of the transaction." Telkom's shares dropped 7.05 points to close at $85.05, a 7.60% drop.
- Shares of Acorn International Inc. (ATV), a leading integrated marketing firm in China, plummeted more than 17% yesterday (Wednesday) after reporting that third-quarter operating income declined 41.6%. Acorn attributed that decline to heavy sales of the company's mobile handsets, which have higher production costs than many of its other product lines and eroded profit margins. "Due to heightened competition in the mobile handset and Ozing [brand] electronic learning product in China we did not achieve the expected growth in our operating income in this past quarter," Chairman and Chief Executive Officer James Hu said in a company statement. The company has taken steps to correct the problem, deploying new pricing and distribution strategy, the company said. Management is still expecting the company's net income to range between $24 million and $26 million on revenue between $240 and $256 million for the full year. Acorn shares closed at $10.10, a record low.
- Automaker Porsche Automobil Holding SA announced that total car sales for the four months ending in November were expected to be 30,700 compared to 25,939 in 2006, the Wall Street Journal reported. Sales of the Cayenne off-road model were especially strong, rising 76% compared to the year ago period to 13,400. Porsche 911 sales were also up in the four months, while the Boxster line showed a decrease of 15%. The report said that Porsche officials felt strongly that the company would attain the same record sales and profit numbers as 2006.Chief Financial Officer Holger Haerteralso said the fiscal 2007-08 results would be very good, but he expressed concern about the U.S. market. In addition to significant reductions in inventories in the United States, Porsche has extended its dollar-euro hedge until 2013. The report contained no mention whether Porsche intends to add to its 30% stake in Volkswagen AG (VLKAY) now that legal restrictions preventing potential takeover have been removed.
- Australia's Macquarie Group Ltd. and MBK Partners Ltd. are seeking a $537 million loan to pay for their joint purchase of a 30.5% stake in South Korean cable-TV operator C&M Ltd., sources familiar with the transaction have told Bloomberg News. Macquarie and MBK are buying the stake from U.S. investment bank Goldman Sachs Group Inc. (GS), and intend to bid for the rest of C&M, South Korea's No. 2 cable-TV firm, Bloomberg reported. C&M founder Min Joo Lee, who set up the Seoul-based company in 2000, owns 65.1% of the firm. MBK was founded in 2005 by former executives of The Carlyle Group, a U.S. buyout firm that has a lot of connections "inside the Beltway" – a euphemism for being a Washington, D.C. insider. MBK put in a sole bid earlier to buy the whole of C&M for about $3.22 billion before deciding to buy the 30.5% stake jointly with Macquarie, the sources told Bloomberg.