Finance news you need to know today


The Australian dollar has slumped after China cut its interest rates to curb two days of dramatic stockmarket losses. At 0630 AEST on Wednesday, the currency was trading at 71.35 US cents, down from 71.82 cents on Tuesday.

SYDNEY — The Australian share market looks set to open lower after Wall Street fell for the sixth straight session, with the Dow posting another triple-digit decline after a morning rally fizzled. At 0645 AEST on Wednesday, the share price index futures contract was down 51 points at 5,076.

BEIJING — China’s central bank has cut its benchmark interest rates and the amount of cash banks must keep on hand.

WASHINGTON — US consumer confidence has rebounded in August after slumping in July, helped by an improved views of business conditions and jobs over the next six months, the Conference Board says.

WASHINGTON — US home prices growth ticked lower in June, but remained at a solid annual pace of gains amid tight inventory in the housing market, according to new private data.

NEW YORK — Prosecutors have arrested a former JPMorgan Chase analyst and two friends in California on charges they made more than $US600,000 ($A837,871.81) on insider trading deals, the Justice Department says.

LONDON — British insurer Royal & Sun Alliance says it’s received a STG5.6 billion ($A12.34 billion) takeover approach from Swiss rival Zurich Insurance, sending its share price soaring.

PRETORIA — South Africa’s economy has unexpectedly shrank in the second quarter, data shows, raising fears of a recession. AAP cdh

GE to sell healthcare finance unit for $8.5bn


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General Electric has taken another big step in unwinding its finance arm by agreeing an $8.5bn sale of its healthcare finance unit to Capital One, one of the fastest-growing US banks.
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Capital One will pay a 6 per cent premium to the value of the unit’s loans to acquire the business, in a move that will help the ambitious second-tier bank become a bigger player in commercial lending. GE Capital’s healthcare unit provides financing to companies, investors and developers across various sectors of the industry, including hospitals, pharmaceuticals and medical devices.

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The McLean, Virginia-based bank is among a group of second-tier lenders to have built aggressively since the financial crisis, taking advantage of turmoil at global banks subject to strategic overhauls and tougher regulatory regimes. Capital One’s total assets of $311bn at the end of June were roughly double the pre-Lehman level, pumped up by deals such as the 2012 acquisition of ING’s online banking businesses in the US.

“This is a strategic investment in a specialty industry segment that we have been building out for the past several years,” said Michael Slocum, president of Capital One’s commercial banking division. “This addition will catapult us to a leading market position in providing financial services to the healthcare sector.”

GE’s sale of its healthcare financing unit will help America’s best-known conglomerate meet its commitment of selling nearly $200bn of assets at its finance unit as part of a shake-up.

Jeff Immelt, GE’s chief executive who succeeded Jack Welch more than 13 years ago, said in April that the conglomerate would dispose of most of its financial services operations to help the group return to its industrial roots.

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The tougher regulatory framework that emerged in response to the economic crisis, including higher capital ratios and curbs on risky loans, had made it less profitable for the conglomerate to run GE Capital.

Ultimately the inability to boost margins and the division’s negative impact on the rest of the business led Mr Immelt to agree to a staggered sale, which is expected to take about two years.

The sale of the healthcare financing business follows GE Capital’s sale of its private equity lending unit to the Canada Pension Plan Investment Board for $12bn in June.

In April, when the sale plan was announced, GE sold the majority of its real estate portfolio to Blackstone and Wells Fargo for $26.5bn.

It still has to sell most of its US and international commercial lending business as well as its global consumer business. Wells Fargo is seen as a potential buyer of some of these assets, according to people familiar with the negotiation process.

Clinton raising money in finance sector as she raps industry


Hillary Rodham Clinton’s economic agenda targets companies that focus on short-term profits and high-speed trading instead of investing in workers. The Democratic presidential candidate’s finance operation is going after their executives for another purpose — donations.

A day after proposing higher capital gains taxes on short-term investors, Clinton raised at least $450,000 Tuesday night at the Chicago home of Raj Fernando, a longtime donor. His firm, Chopper Trading, specializes in high-frequency transactions and was recently purchased by Chicago-based competitor DRW.

Clinton’s summertime fundraising circuit highlights a central tension of her campaign: how to encourage financial executives to open their wallets for her presidential effort even as she comes out with plans aimed at reining multimillion-dollar paychecks. Since her first presidential campaign in 2008, income inequality has become a bigger force in Democratic politics, with liberal voters clamoring for candidates who will take a sharply populist turn and enforce tough new regulations on Wall Street.

The early outlines of Clinton’s economic plans have included steps to raise taxes on hedge fund and private equity bonuses, penalize short-term investors with higher tax rates and strengthen penalties for rogue executives who are involved in fraudulent deals on Wall Street. She wants further strengthening of financial regulations put in place after the 2008 financial crisis.

In announcing her economic platform in New York, Clinton called some of the financial institutions led by her top contributors “too complex and too risky.” She said “serious risks are emerging from institutions in the so-called shadow banking system, including hedge funds, high-frequency traders, non-bank finance companies.”

In New Hampshire in April, she singled out hedge fund managers who pay lower tax rates. “If it’s just, you know, playing back in forth in the global marketplace to get one-10th of 1 percent advantage, maybe we should not let that go on because that is unfortunately kind of at the root of some of the economic problems that we all remember painfully from ’08.”

Clinton has avoided the kind of rhetoric that Obama used to describe the industry — “fat cat bankers on Wall Street,” the president said in 2009 — after he raised millions from the industry in his first presidential campaign. Obama had pushed for the 2010 regulations.

Alan Patricof, a private equity pioneer and longtime Clinton donor, said Obama was polarizing on the issue but Clinton “is being very realistic” and he’s not aware of donors from the industry holding back from her.

Nor is she shy about turning to them for campaign money, sometimes in events at executives’ homes. As she’s put it about her aggressive fundraising operation, Republicans and their allies will spend billions of dollars to defeat Democrats and “we’re going to have to be in a position where we can defend ourselves.”

In her first campaign finance report, people who listed occupations in banking, finance, investment, money management, private equity or venture capital contributed more than $1.6 million to Clinton’s campaign, according to a review by The Associated Press. The vast majority of those checks were for the maximum legal amount of $2,700.

Following the event in Chicago with Fernando, Clinton was attending a Wednesday fundraiser hosted by George Reddin, a North Carolina-based managing director of FMI Capital Advisors who has specialized in mergers and acquisitions in the construction materials industry.

About a dozen of Clinton’s top campaign bundlers — donors who have raised at least $100,000 for her presidential bid — work in finance and investing, such as private equity investors Imaad Zuberi and Deven Parekh and hedge fund managers Marc Lasry and Orin Kramer.

Clinton also has appeared at fundraisers held by Doug Teitelbaum, founder of investment firm Homewood Capital, and Lisa Perry, whose husband, Richard, is a top hedge fund executive.

Morgan Stanley vice chairman Tom Nides, who worked for Clinton at the State Department, said the new policies haven’t caused any waves on Wall Street and predicted they’re unlikely to hamper Clinton’s fundraising.

As a senator representing New York, Clinton established strong relationships with Wall Street donors and Nides said she has maintained those ties, in part by carefully measuring the rhetoric she uses when she talks about the industry.

“She’s been tough, but I don’t think she’s been irrational,” he said. “People in our industry know they’ll have someone who has a good reputation or at least someone who will listen to them.”