AIG Said to Mull Leaving Maiden Lane Headquarters

American International Group Inc. (AIG), the insurer rescued by U.S. taxpayers, is weighing a move from its headquarters at 180 Maiden Lane in lower Manhattan, said two people with knowledge of the company’s planning.

The approximately 2,000 employees there may be transferred to other locations as part of a cost-saving consolidation, said one of the people, who asked not to be identified because the deliberations are private. An AIG-owned property at 175 Water St., within walking distance from Maiden Lane, is among the buildings that may absorb the workers, the person said.

AIG’s departure would add to vacancies in lower Manhattan, including space in the World Trade Center and World Financial Center. The Maiden Lane property is co-owned by SL Green Realty Corp. (SLG) and Moinian Group, which have listed about 850,000 square feet (79,000 square meters) in the building as available in May 2014, according to CoStar Group Inc. (CSGP)

“The downtown market is facing an absolute glut of space,” said Aaron Jodka, manager of U.S. market research at CoStar, a Washington-based real estate data service. “Tenants are going to have their choice of space, and it’s going to be very challenging in that environment for landlords to be aggressively pushing rents.”

AIG has less need for space as Chief Executive Officer Robert Benmosche shrinks the company and sells units to pay back a U.S. bailout that swelled to $182.3 billion. The New York- based insurer had 57,000 employees worldwide as of Dec. 31, down from 116,000 three years earlier.
AIG’s Commitment

“No final decisions have been made regarding the 180 Maiden Lane lease,” Jim Ankner, a spokesman for AIG, said in a phone interview today. “We are committed to preserving AIG’s presence in New York City.”

Lower Manhattan’s class A office vacancy rate may climb to 17.4 percent by the end of next year from 8.8 percent at the end of June, according to data from Cassidy Turley, a commercial property brokerage with offices in New York.

One World Trade Center, which the Durst Organization is leasing on behalf of owner Port Authority of New York and New Jersey, has about 45 percent of its 3 million square feet still unrented, according to its developers. Larry Silverstein’s 4 World Trade Center has 1.2 million square feet available, and Brookfield Office Properties’s World Financial Center has about 3 million square feet up for lease after former Merrill Lynch & Co. leases expire next year, according to CoStar.
‘Actively Exploring’

AIG leased more than 800,000 square feet at 180 Maiden Lane as of Dec. 31, SL Green, New York’s largest office landlord, said in its annual report. When SL Green bought its 49.9 percent stake in 180 Maiden last year, it underwrote the deal as if AIG wasn’t going to stay, Andrew Mathias, president of New York- based SL Green, said yesterday on a conference call discussing second-quarter results.

“We’re actively exploring the possibilities of both a redevelopment of the asset and bringing it to the market for new tenants,” Mathias said.

“If there’s any management team out there that will lease up their space, I have more confidence in SL Green,” said Mitchell Germain, an analyst at JMP Securities LLC in New York. “They recognize the market on a positive and on a negative. They see the deficiencies in the market, and they clearly will make sure their product is priced accordingly.”
Tokyo Property

The Maiden Lane property became AIG’s principal office after the company struck a deal in 2009 to sell its previous headquarters at 70 Pine St. to Kumho Investment Bank, a South Korean firm, and Youngwoo & Associates, a Manhattan-based developer. AIG also sold a Tokyo office property to Nippon Life Insurance Co. for about $1.2 billion.

Eric Gerard, a spokesman for Moinian, referred questions regarding the AIG lease to SL Green. Heidi Gillette, an SL Green spokeswoman, didn’t respond to a voice mail.

AIG has said it’s working to cut general and administrative expenses by about $1 billion from 2010 levels by the end of 2015. That’s part of aspirational goals AIG laid out in a 2011 filing, which include increasing its return on equity to at least 10 percent.

S&P 500 Has Longest Weekly Rally Since March on Europe

U.S. stocks rose this week, giving the Standard & Poor’s 500 Index the longest rally since March, amid optimism Europe’s policy makers will act to ease the region’s debt crisis and better-than-expected earnings from Caterpillar Inc. (CAT) to Moody’s (MCO) Corp.

Financial and industrial shares in the S&P 500 climbed at least 2.5 percent as a group, as Caterpillar advanced 6.4 percent and Moody’s jumped 13 percent. Phone stocks surged 3.9 percent, the most among 10 industries, as Sprint Nextel Corp. (S) and MetroPCS Communications Inc. (PCS) beat sales estimates. Apple Inc. (AAPL) and United Parcel Service Inc. (UPS) fell at least 3.1 percent amid disappointing earnings. Facebook (FB) Inc. lost 18 percent after reporting its first results since its initial public offering.

The S&P 500 advanced 1.7 percent to 1,385.97 for the week, rising the most since June and extended its gain for the year to 10 percent. The Dow Jones Industrial Average climbed 253.09 points, or 2 percent, to 13,075.66. Its three-week rally was the longest streak since January.

“There is hope that policy makers will do what they need to do to ease the debt crisis,” said Michelle Clayman, chief investment officer at New Amsterdam Partners in New York, which manages $2.5 billion. “Whenever that happens, the market cheers up again. I’m not sure that it’s an issue of people being so happy. It’s more that things aren’t going to get worse and maybe they will stabilize.”
Lowered Outlooks

Equities slumped in the first three days of the week amid concern more of Spain’s regions will seek aid, while Moody’s Investors Service lowered outlooks for Germany, the Netherlands and Luxembourg. The S&P 500 then posted the biggest two-day rally since December, surging 3.6 percent, after speculation grew that the European Central Bank would buy bonds to ease borrowing costs for Spain and Italy.

ECB President Mario Draghi will hold talks with Bundesbank President Jens Weidmann in an effort to overcome the biggest stumbling block to a new raft of measures including bond purchases, two central bank officials said on condition of anonymity because the talks are private. German Chancellor Angela Merkel, French President Francois Hollande and Draghi pledged to do everything to protect the euro.

Economic reports showed the U.S. economy expanded at a slower pace in the second quarter as a softening job market prompted Americans to curb spending. Consumer confidence in July dropped to the lowest this year, new home sales unexpectedly fell from a two-year high while orders for equipment slumped.
Fed Speculation

Concern about a global economic slowdown and a worsening crisis in Europe sent the S&P 500 down 9.9 percent from its 2012 high in April through June 1. The index has since climbed 8.4 percent after central banks in Europe and China cut interest rates and weaker-than-expected economic data fueled speculation that the Federal Reserve may be close to adding more stimulus. The Federal Open Market Committee meets next week.

“The occurrence of real significant weaknesses will be less and less, unless you have some catastrophic failure in the banking system in Europe,” David Steinberg, who manages about $250 million as founder of Chicago-based DLS Capital Management LLC, said in a phone interview. “Many of the people that want to be out are already out. They’re going to open up their eyes and see that the world is going to continue to go on, and assets are going to go higher.”

An S&P index of financial shares jumped 2.8 percent during the week. JPMorgan Chase & Co. (JPM) climbed 8.8 percent, the most in the Dow, to $36.89, while Goldman Sachs Group Inc. (GS) gained 7.9 percent to $101.64.
Credit Ratings

Moody’s surged 13 percent, the most since October, to $40.91. The second-largest provider of credit ratings reported second-quarter profit that beat analyst estimates as demand rose for its financial information.

Regions Financial Corp. (RF) rose 11 percent to $7.10. The 10th- largest U.S. bank by deposits exceeded estimates for a fourth straight quarter as provisions for loan losses declined.

Caterpillar led industrial companies to a 2.5 percent increase. The largest maker of construction and mining equipment added 6.4 percent to $86.16 after raising its full-year profit forecast. The company, considered a U.S. economic bellwether, is selling more excavators, scrapers and dozers even as it sees a slowdown in some of its largest markets. Machinery sales are climbing as developed countries replace aging equipment and U.S. construction spending gains.

PulteGroup Inc. (PHM), the largest U.S. homebuilder by revenue, climbed 11 percent to $12.01 after reporting better-than- estimated earnings amid a jump in orders. U.S. homebuilders are becoming more profitable as record-low mortgage rates and stabilizing prices lure buyers to new houses.
IPhone Demand

The S&P 500 index of phone companies rallied to the highest level since 2008. Sprint, the third-largest U.S. wireless carrier, jumped 18 percent to $4.31 after iPhone demand helped bolster spending on data plans, lifting the company’s sales above analysts’ estimates.

MetroPCS soared 41 percent, the most since it went public in 2007, to $9.04. The pay-as-you-go wireless carrier reported second-quarter earnings that beat estimates amid a decrease in promotional costs.

While cost cuts helped 72 percent of S&P 500 companies that have reported quarterly results so far exceed analysts’ estimates, sales topped at only 41 percent of companies, according to data compiled by Bloomberg.

Analysts ratcheted down their projections for second- quarter profits at the start of earnings season, forecasting a decrease of 2.1 percent, compared with an increase of 4.4 percent at the beginning of this year, data compiled by Bloomberg show. By the end of the latest week, their outlook improved and they now estimate a 0.8 percent drop.
‘Definitely Suffer’

The earnings beat “shows you that companies are running their business very well and they’re mindful of expenses,” E. William Stone, chief investment strategist at PNC Wealth Management in Philadelphia, said in a phone interview. His firm manages about $112 billion. Their sales picture “does underline that the macro environment is becoming more and more challenging. If it continues to deteriorate, at some point earnings will most definitely suffer.”

UPS, the world’s largest package-delivery company, cut its full-year forecast after a drop in international package sales dragged quarterly profit below analysts’ estimates. The stock declined 3.1 percent to $76.

Apple slipped 3.2 percent to $585.16 after quarterly sales and profit missed analysts’ estimates for the second time since 2003. Customers delayed purchases of existing iPhone versions while awaiting the next model.
Narrower Margins

Facebook plunged 18 percent to a record $23.71 after reporting a slower sales gain and narrower profit margins. Executives led by Chief Executive Officer Mark Zuckerberg, addressing analysts for the first time since the company’s May 17 initial public offering, issued no growth forecasts and said little else to reassure investors who fret that the company is overvalued. The largest social network is down 38 percent from its $38 IPO price.

Raw-material producers posted the only retreat among 10 S&P 500 groups, falling 0.8 percent. Cliffs Natural Resources Inc. (CLF), the largest U.S. iron-ore producer, tumbled 14 percent to $39.39 after the company forecast higher costs and lower prices.

McDonald’s Corp. (MCD) reported second-quarter profit that trailed analysts’ estimates amid slowing U.S. same-store sales and said the restaurant chain may miss its full-year operating income growth target. The shares slipped 2.6 percent to $89.19.

Spain Jobless Reaches Post-Franco Record Amid Austerity: Economy

Spanish unemployment rose to the highest on record after Prime Minister Mariano Rajoy made it easier to fire workers while implementing the steepest budget cuts in the country’s recent democratic history.

Unemployment, already the highest in the European Union, rose to 24.6 percent in the second quarter from 24.4 percent in the prior three months, the National Statistics Institute said in Madrid today. That was the largest proportion since at least 1976, the year after dictator Francisco Franco died, prompting the transition to democracy. The median forecast in a Bloomberg survey of nine economists was 24.7 percent.


The Bank of Spain said this week that the nation’s recession deepened in the second quarter as the government intensified efforts to reduce a budget deficit almost as large as Greece’s. Spanish ministers are focusing on reducing the nation’s debt burden while arguing that the euro area’s monetary policy isn’t helping them to revive its fourth-largest economy.

“We are pessimistic,” said Jose Antonio Herce, a Madrid- based economist at Analistas Financieros Internacionales. “There is every reason to believe activity will contract 2 percent this year and push unemployment to 26 percent.”

Rajoy’s seven-month-old People’s Party government last week gave up on its forecast for the economy to return to expansion next year, replacing a 0.2 percent growth estimate with a prediction for a 0.5 percent contraction. Officials anticipate the economy will shrink 1.5 percent this year while unemployment will peak at 24.6 percent.
No Breadwinners

Today’s jobs data were in line with government forecasts, Deputy Economy Minister Fernando Jimenez Latorre said in Parliament.

More than 50 percent of under 25 year-olds are already jobless in Spain and overall unemployment is as high as 33.9 percent in the southern region of Andalusia, the third-biggest contributor to the nation’s gross domestic product. The number of homes with all breadwinners unemployed has reached 1.7 million, up 27 percent from a year ago.

“The prospect of further employment losses and the end of the tourism season is likely to push the unemployment rate above 25 percent,” Raj Badiani, an economist at IHS Global Insight in London, said in an e-mailed note. “This presents a significant obstacle to any recovery impetus as Spain is set for a deep and prolonged recession.”
Room for Maneuver

Ministers have bemoaned Spain’s lack of room for manoeuver within the single currency to fight its second recession since 2009. The country is experiencing its first major crisis without being able to devalue or increase the amount of money circulating, Economy Minister Luis de Guindos said July 17.

Budget Minister Cristobal Montoro said yesterday the European Central Bank lacked commitment to the monetary union even as its president, Mario Draghi, pledged to do whatever is necessary to defend it. The yield on Spain’s 10-year benchmark bond dropped after the comments and fell further today. It was down 23 basis points at 6.7 percent at 1:32 p.m. in Madrid.

Support for the ruling PP has declined in opinion polls amid spending cuts. A 65 billion-euro ($80 billion) austerity package announced this month, the PP’s fourth since coming to power, has increased to 10 percent of annual GDP the total amount of tax increases and spending cuts the government is trying to implement through 2014.
Labor Overhaul

A labor rule overhaul approved in February made it easier and cheaper to fire workers, leading companies including fashion retailer Adolfo Dominguez SA (ADZ) and cement-maker Cementos Portland SA (CPL) to shed staff. The government needs to step up such measures to overhaul the economy as key energy or public administration reforms have not yet been tackled, Herce said.

“They should’ve been ready to be implemented from day one,” he said. “The PP knew for more than one year before the election that it would come to power.”

Elsewhere today, Japan’s consumer prices unexpectedly fell and retail sales missed analysts’ forecasts, adding to evidence that the economy’s expansion is faltering as gains in the yen and austerity measures in Europe hit exports. In Thailand, industrial output shrank more than economists anticipated in June, sliding 9.6 percent from a year earlier.

The U.S. Commerce Department will release growth figures later today. The data may show that the economy expanded in the second quarter at the slowest pace in ayear. GDP rose at a 1.4 percent annual rate after a 1.9 percent gain in the prior quarter, according to the median forecast of economists surveyed by Bloomberg News.

Barclays’s Lucas Probed in U.K. on Capital-Raise Fee Disclosure

Barclays Plc (BARC) is being investigated over whether it adequately disclosed fees it agreed to pay to the Qatar Investment Authority as it sought to raise money from investors including the sovereign wealth fund, according to a person with knowledge of the situation.

“The bank entered into an agreement for the provision of advisory services by Qatar Investment Authority to Barclays in the Middle East,” the lender said in a June 2008 statement detailing the fundraising. Britain’s Financial Services Authority is probing whether that disclosure was adequate, said the person, who declined to be identified because the terms of the investigation are private.

Barclays’s attempts to put its regulatory troubles behind it in the wake of last month’s record fine for manipulating Libor were complicated today by its disclosure that four current and former senior employees, including Finance Director Chris Lucas, were being probed by the FSA. The bank made the disclosure today as it reported first-half profit that beat analyst estimates.

“We are sorry for what has happened,” Chairman Marcus Agius said in a statement. “However, our leadership continues to focus on the delivery of our financial performance targets.”

Barclays stock jumped 8.7 percent to 167 pence today in London trading, the steepest increase since January. Pretax profit excluding one-time items rose 13 percent to 4.23 billion pounds ($6.6 billion), helped by fewer bad loans at the consumer unit and market-share gains at the investment bank. The result beat the 3.9 billion-pound median prediction of eight analysts surveyed by Bloomberg.
Libor Lawsuits

The shares are still about 13 percent below their June 26 close, the day before the record Libor fines were disclosed. Criticism from lawmakers and the Bank of England forced the resignation of the bank’s top three executives, including former Chief Executive Officer Robert Diamond. Barclays also said today it was the target of more lawsuits linked to claims it rigged the London interbank offered rate. The bank didn’t give an estimate of how much the suits may cost.

Barclays raised 7 billion pounds of capital from investors including the Abu Dhabi and Qatar sovereign wealth funds as the financial crisis worsened in 2008. The move allowed the bank to avoid a government bailout, unlike Royal Bank of Scotland Group Plc and Lloyds Banking Group Plc.
Deliberately Disclosed

“The FSA is investigating the sufficiency of disclosure in relation to fees payable under certain commercial agreements and whether these may have related to Barclays capital raisings in June and November 2008,” the lender said in today’s statement.

Stephen Benzikie, an external spokesman for Qatar Holding, part of the Qatar Investment Authority, and Liam Parker, an FSA spokesman, declined to comment.

Barclays Chairman Marcus Agius said on a call with journalists today that Lucas’s name was deliberately disclosed by the bank as the information was potentially market-moving, and said investigations such as this occur “routinely.” He said the board retained “full confidence” in Lucas.

Roger Jenkins, former head of Barclays’s structured capital markets unit, received a bonus of more than 30 million pounds for helping to broker the investments, while Amanda Staveley of PCP Capital Partners was paid a 40 million-pound commission for her advice, the New York Times reported in November 2008.

“Barclays considers that it satisfied its disclosure obligations and confirms that it will cooperate fully with the FSA’s investigation,” the bank said today.
Investment Banking

Spokesmen for Staveley and Jenkins weren’t immediately available to comment today.

Profit at the retail and business banking unit, overseen by Anthony Jenkins, climbed to 1.7 billion pounds from 1.5 billion pounds in the year-earlier period as provisions for bad loans and costs fell.

Total revenue at the investment bank increased 4 percent in the first half from the year-earlier period to 5 billion pounds, as revenue from fixed income, currency and commodities, known as FICC, jumped 11 percent. The division’s adjusted pretax profit rose to 2.6 billion pounds in the half from 2.4 billion pounds.

Rich Ricci, who runs the investment bank Diamond had built from the 1990s, said the business was gaining market share from rivals.

“In FICC, nobody has done better,” said Christopher Wheeler, a banking analyst at Mediobanca SpA. “The Lehman footprint is very powerful,” he said, referring to the London- based lender’s purchase of Lehman Brothers Holdings Inc.’s U.S. operations out of bankruptcy in 2008.
Wall Street

By contrast, Wall Street’s five biggest banks, including JPMorgan Chase & Co. and Goldman Sachs Group Inc., posted the lowest first-half revenue since 2008 in the first half of 2012 as trading and deal-making dried up.

Total staff costs, including pay and bonuses, fell 8.4 percent to 5.15 billion pounds. The bank isn’t preparing any reductions in headcount, Ricci said.

Ricci is the most prominent Diamond lieutenant left at the bank after Chief Operating Officer Jerry Del Missier and Agius said they would step down after the 290 million-pound Libor fine. The bank has also faced criticism from lawmakers and has been forced to make provisions after regulators ordered it to compensate clients mis-sold payment-protection insurance as well as interest-rate hedging products.

Barclays today said it set aside an extra 450 million pounds during the half to compensate customers who were mis-sold derivatives. The lender has opened an internal review into its business practices, led by Anthony Salz, an executive vice chairman at Rothschild and former corporate lawyer.