JPMorgan shuffles top retail bank executives (Reuters)

NEW YORK (Reuters) -- JPMorgan Chase & Co shuffled several retail banking executives, signaling Chief Executive Jamie Dimon's determination to rebuild the bank's profits and elevate in-house talent to high-profile roles.

In a statement released on Tuesday, the bank said retail banking chief Charlie Scharf was moving to the company's private equity arm and that other senior executives were taking on additional responsibilities in his former division.

Todd Maclin, 55, chief executive of JPMorgan's commercial bank, will continue in that position and also have responsibilities for the company's branch network, consumer franchise, small-business banking and private banking business, according to the statement.

Gordon Smith, 52, CEO of card services, will take on responsibility for the company's auto finance and student lending business, on top of his current role.

Dimon, 55, talking to Reuters in an interview after the announcement, said the changes should contribute to his push to raise the bank's profits. "This should help us," he said.

"Sometimes it is good to have a fresh pair of eyes looking at things," Dimon added.

Dimon said Scharf, 46, had told him a year ago that he wanted to do something different at the bank. "It was his decision to go, and when that happens I have to figure out who is going to do his job. It takes a while to get all of the ducks in a row."

The businesses that Scharf was responsible for will now be overseen by Maclin, Smith, and Frank Bisignano, Dimon's chief administrative officer whom he assigned in February to fix the retail bank's mortgage business.

In a memo to staff, Dimon said Scharf "will continue to work with our consumer team to help transition the business and assist in any way possible."

The shifts come as JPMorgan tries to strengthen its retail banking arm, which is being hurt by low demand for loans and hit by growing regulatory demands that will squeeze profits.

The retail financial services segment fell the furthest short of its profit goals of any JPM segment in 2010, with a return on equity of 9 percent compared with a target of 30 percent, according to a report by analyst Christopher Mutascio of brokerage Stifel Nicolaus.

The bank also said its investment banking head, Jes Staley, will assume oversight of its business outside of the United States, taking over from Heidi Miller, 58, who will retire early next year.

Dimon said the moves were not an explicit part of the company's preparations for his eventual successor, but he added: "It is always good to cross-train people."

MORTGAGE CHIEF PUSHED OUT

The bank said in a separate memo to staff on Tuesday that its chief of home lending, David Lowman, would be leaving. He had been pushed aside in February after the bank racked up billions of dollars in losses on mortgages and became mired in litigation over foreclosures.

"Dave Lowman and I have decided he will leave the firm," Bisignano said in the memo.

Lowman joined JPMorgan from Citigroup in 2006. During his tenure at JPMorgan, the bank picked up bad mortgage assets through its acquisitions of investment bank Bear Stearns & Co and retail bank Washington Mutual.

Under Lowman, the home lending unit was so disorganized that the bank seized homes of at least 33 U.S. military servicemen on active duty, violating federal law and prompting Dimon to apologize at the company's annual shareholder meeting. The bank has said it is forgiving those loans.

Lowman could not immediately be reached for comment on Tuesday.

Lowman appeared before congressional committees last year where he was chastised for his division's refusal to cooperate with borrowers and modify mortgages. Lowman said in a June 2010 hearing that the bank was understaffed but was adding employees to work on problem mortgages. In a hearing in November, Lowman acknowledged mistakes in foreclosure paperwork and said the bank was cleaning up errors.

JPMorgan and other large banks are in negotiations with the Department of Justice and state attorneys general to settle probes into mistakes in foreclosures.

The bank recorded $1.1 billion in litigation expenses in the first quarter, primarily because of mortgage-related claims. It also marked down the value of its mortgage-servicing contracts by $1.1 billion because of increased costs and booked $1.1 billion of expenses for losses on its residential real estate portfolio.

(Editing by Maureen Bavdek, Matthew Lewis and Steve Orlofsky)

View the original article here

Citigroup's sale of consumer finance unit hits block: report (Reuters)

(Reuters) – Citigroup's (C.N) attempts to sell its CitiFinancial unit have hit a stumbling block as potential bidders remain uncertain about the unit's funding as a standalone business, the Financial Times reported, citing people familiar with the matter.

CitiFinancial, one of the largest U.S. consumer finance companies, was put up for sale as Citigroup tightened its focus on wealthier, more credit-worthy clients.

In March, Reuters reported the company might retain a stake in the unit and would offer partial financing to bidders, who included the Who's Who of the private equity world.

Potential buyers are waiting for reviews by credit rating agencies, which are expected to report on the units finances in next two weeks, the business daily reported.

Citi also plans to produce audited financial statements on the standalone unit and has not made it clear how large a funding gap it would be prepared to fill, the paper said.

Three groups remain in the sales process -- Blackstone, Carlyle, and Brysam Global Partners form one group, Apollo Management and JC Flowers form a second bidding group, while Centerbridge Capital Partners leads a third -- the Financial Times said.

Citigroup declined to comment.

The CitiFinancial business has a book value of about $2 billion, and comes with some $13 billion of assets.

Citigroup is looking to sell the business without taking losses, unlike insurer American International Group Inc (AIG.N), which last year sold its consumer finance business at a loss.

(Reporting by Jochelle Mendonca in Bangalore, editing by Bernard Orr)

View the original article here

Former TBW execs get prison time for roles in fraud (Reuters)

Alexandria, Virginia (Reuters) – Two former senior Taylor, Bean & Whitaker Mortgage Corp executives were sentenced on Friday to several years in prison for their roles in a nearly $3 billion fraud that took down the big lender and a major bank.

The fraud ran more than seven years until August 2009 when TBW collapsed after the U.S. housing market imploded, taking Colonial BancGroup Inc's (CBCDQ.PK) Colonial Bank with it and putting hundreds of people at the firm out of work.

Company and bank officials were accused of trying to cover up enormous losses by moving money between accounts at Colonial Bank and selling mortgage loans that did not exist, were worthless or already had been sold.

The Obama administration elicited guilty pleas from six senior executives. TBW's former chairman, Lee Farkas, was convicted by a jury in April on 14 counts of bank, securities and wire fraud as well as conspiracy.

"They knew that without their fraud scheme, TBW would fail," said Neil MacBride, the U.S. attorney for eastern Virginia. "They allowed Lee Farkas to control and manipulate them into doing what they knew was wrong, and now they will pay for their crimes."

It is one of the few cases in which prosecutors have been able to penetrate the executive suites of a major firm in the wake of the 2008 global financial crisis. Most prosecutions have involved lower-level employees or much smaller firms.

Desiree Brown, TBW's former treasurer, was sentenced by District Judge Leonie Brinkema to six years in prison after she tearfully acknowledged her wrongdoing. She pleaded to one count of conspiracy to commit bank, wire and securities fraud.

"It was never my intent to commit a crime," she told the court. "It was always my intent to fix the problem."

Prosecutor Patrick Stokes sought an eight-year sentence, telling the judge that Brown had "a substantial role in the fraud" and that she had been "blinded by her loyalty to Mr. Farkas."

Her attorney urged a lesser sentence, suggesting five years and noting that she was just a "country girl from Nebraska with a high school" education. She started as a receptionist before working her way up in the company.

Brinkema also sentenced TBW's former president, Raymond Bowman, to 30 months in prison. He had pleaded guilty to a conspiracy fraud charge as well as for lying to investigators when they raided the mortgage firm two years ago.

Prosecutors had sought five years in prison.

Brinkema gave lower sentences than sought by prosecutors. One prosecutor, Charles Connolly, urged the stiff penalties be imposed because "there needs to be a message sent to the Street" that the conduct was unacceptable.

However, the judge said the two were unlikely to commit crimes again, noted their cooperation and said that they were likely decent people. However, she said it was a massive fraud and the sentences would serve as a deterrent to others.

Connolly told the judge that the TBW investigation was ongoing. Farkas is due to be sentenced on June 27.

Before its collapse, TBW was one of the country's largest privately-held mortgage lenders, doing some $20 billion in mortgage sales a year, and Colonial Bank was one of the top 50 U.S. banks before regulators took it over.

Authorities have estimated the fraud at nearly $3 billion. The executives were also accused of misappropriating money from one of its own funding mechanisms which had two big investors, Deutsche Bank AG (DBKGn.DE) and BNP Paribas SA (BNPP.PA).

As losses mounted at TBW, the firm tried to drum up capital to help Colonial Bank win $553 million in funding from the federal bank bailout program known as the Troubled Asset Relief Program, prosecutors said. No money was disbursed.

The cases are: USA v. Bowman, No. 11-cr-118 and USA v. Brown, No. 11-cr-84 in U.S. District Court for the Eastern District of Virginia.

(Editing by Robert MacMillan)

View the original article here