Business Blog Posts

The IMF deal was hailed by fund Managing Director Dominique Strauss-Kahn as a "historical" moment that will see Europeans give up two seats on its 24-strong board to powerful developing countries and transfer 6 percent of votes to them.

"This makes for the biggest reform ever in the governance of the institution," Strauss-Kahn, who heads the 187 country body, told reporters.

The G20 agreed a year ago to shift at least 5 percent of voting rights to developing countries such as India and Brazil whose clout within the Fund has not kept pace with their emergence as major engines of global growth.

Despite the surprise deal on the IMF, which had not been expected until G20 leaders meet in South Korea next month, efforts to firm commitments to enshrine numerical targets for current account deficits met with tough resistance.

Attempts to firm up rhetoric in the final communique to push emerging market countries to accept meaningful near-term appreciation of their currencies failed and all countries will commit to is to refrain from "competitive devaluation."

"We're all committed to moving toward market determined exchange rates that reflect underlying fundamentals and refrain from competitive devaluation," said an official, who spoke on condition of anonymity.

The lack of a stronger pledge from the likes of China and the South Korean will likely hit the dollar, economists said.

A U.S. official separately told Reuters the United States had no expectation its proposal of setting numerical targets on external balances would make it into the G20 statement.

The U.S. official said Washington knew that including specific targets for imbalances at this stage would be rejected by a number of countries with structurally high trade surpluses, including Germany and major commodity exporters. But it helped focus the discussions which initially were in disarray, he said.

A source with knowledge of the night-long discussions confirmed that the final statement would water down proposals on tackling external imbalances. "Persistently large imbalances would warrant an assessment," the communique would state, he said.

Such an outcome is what other G20 officials had predicted, given the disparate views of the diverse group.

China was against any limits on imbalances, another G20 source said on Friday. He also said there was a "rift down the middle" on currencies and International Monetary Fund reforms, and the final statement would be "bland."

There was, however, broad agreement that "unilateral and uncoordinated responses" to shore up fragile economies could prove damaging for everyone, a source said.

In a letter read to fellow finance ministers of the G20 on Friday, Treasury Secretary Timothy Geithner said countries should act to reduce their current account imbalances below a specified share of national output.

The biggest was Hillcrest Bank of Overland Park, Kansas, which had approximately $1.65 billion in total assets and $1.54 billion in total deposits.

Regulators also closed First Arizona Savings, Scottsdale, Arizona; First Suburban National Bank, Maywood, Illinois; First National Bank of Barnesville, Barnesville, Georgia; Gordon Bank, Gordon, Georgia; Progress Bank of Florida, Tampa, Florida; and First Bank of Jacksonville, Jacksonville, Florida.

A newly chartered bank subsidiary of NBH Holdings Corp, Boston, Massachusetts, will assume all of the deposits of Hillcrest Bank.

The new NBH subsidiary, also called Hillcrest Bank, also agreed to purchase essentially all of the failed bank's assets, the FDIC said.

First Arizona Savings had approximately $272.2 million in total assets and $198.8 million in total deposits.

At the time of closing, the bank had an estimated $1.8 million in uninsured funds.

The FDIC said it was unable to find another financial institution to take over the banking operations of First Arizona Savings. As a result, checks to depositors for their insured funds will be mailed on Monday.

First Suburban National Bank had about $148.7 million in total assets and $140.0 million in total deposits.

Seaway Bank and Trust Company, Chicago, Illinois, assumed all of First Suburban's deposits and agreed to purchase essentially all of the failed bank's assets.

First National Bank of Barnesville had approximately $131.4 million in total assets and $127.1 million in total deposits.

United Bank of Zebulon, Georgia, assumed all of the Barnesville bank's deposits and agreed to purchase essentially all of the assets.

Gordon Bank had approximately $29.4 million in total assets and $26.7 million in total deposits.

Morris Bank of Dublin, Georgia, paid a premium of 0.5 percent for the deposits of Gordon Bank and agreed to purchase about $11.5 million of the failed bank's assets. The FDIC will keep the remaining assets for later disposition.

Progress Bank of Florida had approximately $110.7 million in total assets and $101.3 million in total deposits.

Bay Cities Bank of Tampa, Florida, assumed all of Progress Bank's deposits and agreed to purchase essentially all of the failed bank's assets.

* Some caution was expected ahead of the conclusion of a Group of 20 meeting in South Korea, which is seeking to tackle economic imbalances and fend off the prospect of damaging currency devaluations.

* The dollar pared its losses on wariness over whether any clear agreement would be reached at the meeting, and the U.S. urged countries to avoid using their currencies to gain an economic advantage.

* U.S. corporate earnings in focus on Friday include Verizon Communications (VZ.N), which is expected to lose some ground for now to rival AT&T, the exclusive U.S. carrier of Apple's iPhone. Some analysts, however, are optimistic about the future amid speculation that the iPhone may finally come to Verizon customers next year.

* Other companies expected to report earnings include manufacturer Honeywell HON.L and oilfield service provider Schlumberger (SLB.N)

* In company news, AIA, the Asian life insurance arm of AIG (AIG.N), is set to raise $17.9 billion after pricing its Hong Kong IPO at the top of its range, as investors piled into a company with a wide footprint across rapidly growing Asia.

* Genzyme (GENZ.O) will meet investors in New York to argue its case for rejecting an $18.5 billion offer from French drugmaker Sanofi-Aventis (SASY.PA). The U.S. biotechnology company will provide a 2011 earnings forecast, which, if higher than analysts are expecting, could lead Sanofi to raise its bid.

* Wall Street edged higher late on in a choppy session on Thursday, buoyed by strong earnings but a firmer U.S. dollar limited gains.

* Shares in American Express (AXP.N) and SanDisk (SNDK.O) were among those to rise after the closing bell following the release of their earnings, while Baidu Corp (BIDU.O) slipped in extended trade after its results.

* On the economic front, two top Federal Reserve officials gave competing views on the need for more monetary stimulus to the U.S. economy, continuing a public debate over further easing even though the core view at the central bank appears to favor such a move.

* Growing speculation in recent weeks that the Fed will extend quantitative easing measures at its next meeting in November has put pressure on the dollar while boosting equities, but uncertainty over how much the central bank might inject into the economy has caused some choppiness in markets.

In Europe, the FTSEurofirst 300 .FTEU3 index of top shares was down 0.2 percent by 5:14 a.m. ET, with mining shares among the heaviest fallers.

(Reporting by Harpreet Bhal; Editing by Greg Mahlich)

G20 finance officials started their formal meetings on Friday with nations from the developing world and Japan dismissing the U.S. proposals which it says are aimed at defusing tensions that economists fear could trigger trade wars.

U.S. Treasury Secretary Timothy Geithner, in a letter to finance leaders that was seen by Reuters, said "countries with persistent surpluses should undertake structural, fiscal and exchange rate policies to boost domestic sources of growth."

In return, countries such as the United States that are running big budget and trade deficits would adopt "sustainable medium-term fiscal targets."

Geithner's overtures have already been rejected by countries as diverse as India and Japan and markets are skeptical of a universal deal that would address global economic imbalances and tackle attempts by many emerging economies and others to weaken their currencies.

While the G20 won praise for coordination of stimulus packages during the global financial crisis, its sense of unity has gradually evaporated in the face of strains resulting from unprecedented efforts to revive global growth.

"There is an action plan, but there is an awful lot of complaints, proposals," Russian finance official Andrey Bokarev said ahead of the meetings.

A financial source who met with Geithner in South Korea said that the U.S. official had asked countries to limit their current account surpluses or deficits to 4 percent of gross domestic product, something that few G20 members felt able to accept.

China, India, Saudi Arabia and Russia are all running substantial surpluses while the U.S. is in deficit.

"We need to talk about it first, but numerical targets are unrealistic," Japanese Finance Minister Yoshihiko Noda said.

The issue of addressing "undervalued" currencies will also tax leaders, although Canadian policymakers said that China had agreed in principle to move toward more foreign exchange flexibility.

The U.S. dollar was down 0.27 percent against a basket of six major currencies, near a low for the year struck last Friday and currency strategists said there would be further weakness if the G20 disappointed.

CURRENCY ISSUE REMAINS UNANSWERED

Geithner's letter made no reference to the anticipated language of the final communiqué on foreign exchange arrangements.

He did state that G20 countries "should commit to refrain from exchange rate policies designed to achieve competitive advantage by either weakening their currency or preventing the appreciation of an undervalued currency."

The pricing of the IPO, set to be the world's third biggest, comes amid a boom of new listings in Asia and puts an end to a long-running saga for American International Group Inc

(AIG.N).

Its bid to sell AIA and use some of the proceeds to pay back part of a whopping $182.3 billion U.S. bailout it received during the financial crisis began two years ago and included two failed auction attempts and two floatation efforts.

AIA said on Friday the IPO was priced at HK$19.68 each and fully exercised the upsize option, confirming an earlier Reuters report. If the underwriters exercise the overallotment option, the IPO size will rise by 15 percent to $20.5 billion. AIA's trading debut is set for October 29.

"Investors did not dare to miss this jumbo deal, as the market has ample liquidity and the sentiment is very strong," said Antonny Cheng, a fund manager at Gain Asset Management Ltd.

AIA has been in the Asian region for more than 90 years and operates in 15 markets, with forecast pre-tax operating profit of $2 billion.

Life insurance premiums in Asia-Pacific are forecast to grow at a compound annual clip of 12.3 percent between 2009-2014, Sigma Swiss Re estimates, compared with flat to modest growth in other parts of the world.

Still, the company faces a tough challenge with expanding in China, where the mainland's top industry players dominate and more foreign competitors are flooding the market.

The IPO will value AIA at $30.5 billion at the top end, with AIG holding a 41.6 percent stake that will drop to 33 percent if the green-shoe option is exercised in full.

"It's more or less fully valued after the shares were sold at the top end," said Francis Lun, general manager with Fulbright Securities. "Still one could expect a 5 percent upside on debut."

AIA sold 5.86 billion secondary shares and exercised the upsize option to sell an additional 1.17 billion secondary shares due to strong demand from investors.

Unlike many other foreign insurers, AIA has 100 percent ownership of its entities in China, Indonesia, Malaysia, Thailand and Vietnam. AIA has more than 300,000 agents in Asia.

"This is a cost effective way for IPO investors to ride China's growth," said Francis Gaskins, president of IPOdesktop.com in Marina del Rey, California.

Asian IPOs raised $90 billion in the first three quarters, more than double the combined total from the United States, Europe, the Middle East and Africa, according to Thomson Reuters.