MADRID (Reuters) – The Spanish government has hired Goldman Sachs to carry out an independent valuation of Bankia , the ailing bank taken over by the state last week, Spanish newspaper Expansion said on Friday.

The U.S. bank will review Bankia’s and its parent company BFA’s books and determine within a month how much the state should inject to refloat the lender, which had to be rescued after its auditor, Deloitte, identified several gaps in last year’s accounts.

Expansion said without citing sources that Bankia’s financial hole may reach 8 billion euros on top of the 10 billion euros it needs to set aside to cover potential losses on real estate assets, as required by two financial reforms passed by the government in February and last week.

Bankia’s share price slumped as much as 30 percent on Thursday, when Madrid denied a report that customers had withdrawn more than 1 billion euros ($1.3 billion) from the partly nationalized lender.

A senior government source said on Thursday that the Economy Ministry would name two independent auditors to review Spain’s entire banking sector at noon on Friday.

According to banking sources, BlackRock and Oliver Wyman are likely to be chosen. They will first value the sector as a whole and then look at each bank individually, the government source said.

Moody’s Investor Service carried out a sweeping downgrade of 16 Spanish banks on Thursday, including Banco Santander , the euro zone’s largest, citing a weak economy and the government’s reduced ability to support troubled lenders.

All the banks’ long-term debt ratings were downgraded by at least one notch, and some suffered three-notch cuts.

(Reporting by Julien Toyer; Editing by John Stonestreet)

HOUSTON/NEW YORK (Reuters) – Chesapeake Energy Corp‘s increasing shift from bank loans to costly funding is raising fresh questions about how long the spigot of cash will remain open and whether the company can sell enough assets quickly enough to pay for day-to-day operations.

The company’s problems were brought into sharp focus Monday when CEO Aubrey McClendon, who has a reputation for scrambling to close financing deals, told skeptical stock and bond holders how his company will use a loan from Jefferies & Co. and Goldman Sachs to pay down a $4 billion loan commitment from banks.

While McClendon expressed confidence Chesapeake can find buyers for assets, the $3 billion loan announced on Friday evening was a sign that potential bidders were taking advantage of the company’s weakening liquidity and offering low-ball bids for assets.

“The way I look at is, I know they have some desirable assets,” Phil Weiss, analyst at Argus Research, said. “At some point, doesn’t the buyer on the other side of the table say ‘this company is in trouble, I’m going to hold out for better?’”

The company’s shares fell nearly 14 percent on Friday after Chesapeake said in a quarterly filing it would delay or cancel a production deal on oil-rich acreage in South Texas, a transaction that would have brought in $1 billion for the cash-starved company.

Seeking to reassure investors, the Oklahoma City, Oklahoma company said on Monday it is on track to close deals that will bring up to $11.5 billion this year, funds that are essential to closing a gap of around $9 billion. Shares closed up nearly 5 percent on Monday, but are down over 30 percent for the year.

While the loan provides some short-term relief, worries remain. Bond investors are nervous not only about future asset sales, which are effectively required by the new loan, but also about other new loans that may become secured ahead of the bonds, according to Alexander Diaz-Matos of New York credit-research firm Covenant Review LLC.

“I see this term loan today and I worry what is the next step,” said Diaz-Matos, a lawyer and expert in bond covenants. “The loan has a blanket protection against future secured debt,” Diaz-Matos said, noting that is the “top-line concern” for bond investors, “who don’t have meaningful protection against secured loans.”

“After reviewing Friday’s 10-Q, we believe the company’s financial footing has further deteriorated,” Sterne Agee analyst Tim Rezvan told his clients on Monday, noting the 5-year loan’s pricey 8.75 percent interest rate signaled desperation for cash.

Trading in Chesapeake debt securities was active with bonds maturing in 2020 being quoted around 91.50 cents and 92.50 cents on the dollar. On Friday, those bonds closed at 93.50 cents on the dollar, but not before starting the day around 97 cents on the dollar.

Investors increasingly are betting that Chesapeake’s stock will fall. Those investors, known as short sellers, seek to profit when they borrow shares and then sell them in the hope of buying them back at a lower price for a profit.

The percentage of shares outstanding on loan, which indicates the shares are being loaned to short sellers, has risen to 12.5 percent of shares outstanding from 3.3 percent at the beginning of the year, according to Markit Group.

Another indicator is the cost of insuring Chesapeake’s debt against potential default, which rose to its highest level in more than a year. Five-year credit default swaps widened by 52 basis points to about 804 basis points. That means it costs $804,000 a year for five years to insure $10 million of debt.

CDS prices have climbed more than 45 percent in the past 50 days, signaling sharply rising concerns about the company’s ability to service its debt.

Still, some noted McClendon’s past fund-raising prowess. “About the only thing you can say about Aubrey is he really knows how to raise money,” Mike Breard, oil analyst with Hodges Capital in Dallas, said.

TAPPED OUT?

Chesapeake’s recent misfortunes, which include Reuters’ revelation that McClendon has arranged to borrow more than $1 billion against well interests granted to him as a company perk and resulting regulatory probes, may give buyers an upper hand, analysts and investment bankers said.

The company’s major asset currently on the market is its 1.5 million acres of lease holdings in the oil-rich Permian basin, which has become one of the hottest exploration regions in North America in recent years.

It has also said it plans to find a joint venture partner in another liquids-rich region, the Mississippi Lime basin. It said it expects to close both deals in the third quarter.

“All of the divestitures are at risk,” said one investment banker who spoke on the condition of anonymity. “They’re all challenged. If you’re a buyer and you smell blood would you give full value?”

McClendon said in a conference call on Monday that the company opened its data room for the Permian basin acreage last week, and three possible buyers have already looked at the information. He said more than 10 companies have expressed interest in the assets.

Acreage in the Permian basin has become highly sought after in recent years, with deals bringing in as much as $17,000 an acre (0.4 hectare) for assets believed to be particularly oil heavy.

While Chesapeake has one of the largest land positions in the basin, bankers said some buyers were worried that the company’s lease holdings in the region are too gas heavy and spread out to fetch premium prices.

Chesapeake is hoping to bring in around $5 billion from the sale, according to two investment bankers working in the industry. But bankers said the company may have trouble reaching that number.

“It’s the most attractive asset on the face of it, and people are looking at it and saying, ‘We’re not sure how good it is, we’re not sure if we’re really interested,’” another banker said. “It will be a reasonable process. This is a core area for a lot of people. But if I were a buyer I’d be looking at it and saying this is a seller who needs to sell.”

Companies have not yet submitted bids for the assets. Still, given the price tag and that buyers may have to invest new capital in the properties to keep developing them, bids are likely to come from only large oil and gas companies, like Occidental Petroleum, Apache Corp and Marathon Oil.

Chesapeake has about 2 million acres in the Mississippi Line, a formation in northern Oklahoma and Kansas that contains natural gas and oil.

One challenge facing Chesapeake’s Mississippi Lime JV has been that some of its previous partnerships — especially in so-called dry gas regions — have turned sour.

For instance, Chesapeake signed a deal to sell 25 percent of its Fayetteville shale acreage to BP Plc in 2008. While Chesapeake later sold out of its side in the partnership, BP took a $393 million write down on the value of the assets in 2011.

“It’s been a pretty unsuccessful adventure for guys,” one investment banker said. “It accrues more value for Chesapeake than for its partners, so a lot of guys are reluctant to go into a JV with him.”

(Additional reporting by Michael Erman; Editing by Patricia Kranz and Leslie Gevirtz)

NEW YORK/LONDON (Reuters) – JPMorgan Chase & Co lost $15 billion in market value and a notch in its credit ratings on Friday while a chorus of regulators and politicians reacted to its surprise $2 billion trading loss by demanding stiffer oversight for the banking industry.

The loss by one of Wall Street’s most respected banks embarrassed chief executive Jamie Dimon, a leader lauded for steering his bank through the fallout from the 2008 financial crisis without reporting a loss.

“We know we were sloppy. We know we were stupid. We know there was bad judgment,” Dimon said in an interview with NBC television to be broadcast on “Meet the Press” on Sunday.

He said it wasn’t clear whether the bank had broken any laws or violated any rules. “We’ve had audit, legal, risk, compliance, some of our best people looking at all of that.”

The loss also invited regulatory scrutiny for a man who had all but led the charge to limit it, criticizing the so-called Volcker rule to ban proprietary trading by big banks.

The New York Times reported that the Securities and Exchange Commission has opened a preliminary investigation into JPMorgan‘s accounting practices and public disclosures about the trading loss.

On Friday, Securities and Exchange Commission Chairman Mary Schapiro told reporters: “It’s safe to say that all the regulators are focused on this.”

The debacle sparked new fears about big banks and prompted Dallas Federal Reserve Bank President Richard Fisher, who has called for the breakup of the top five U.S. banks, to say he is worried the biggest banks do not have adequate risk management.

The fallout extended across much of the banking sector, with shares of some of Wall Street’s top names declining on Friday. Among others, Citigroup dropped 4.2 percent, Goldman Sachs fell 3.9 percent and Bank of America slipped 1.9 percent.

JPMorgan was far away the worst performer, however, falling 9.3 percent on a day when some 212 million of its shares traded, the most volume in its history.

Fitch Ratings cut JPMorgan‘s debt ratings a notch and put all of the ratings of the bank and its subsidiaries on negative ratings watch.

While Fitch saw the size of the loss as manageable, “the magnitude of the loss and ongoing nature of these positions implies a lack of liquidity,” the ratings agency said.

“Fitch believes the potential reputational risk and risk governance issues raised at JPM are no longer consistent with an ‘AA-’ rating,” it said.

Standard & Poor’s put JPMorgan and its banking units on a negative outlook, but affirmed its current ratings.

In a conference call disclosing the problem on Thursday, Dimon said the $2 billion in losses could rise by a further $1 billion, and acknowledged they were linked to a London-based credit trader Bruno Iksil. Nicknamed the ‘London Whale,’ Iksil amassed an outsized position which hedge funds bet against.

The Federal Reserve Bank of New York, meanwhile, had been aware of JPMorgan‘s big trading loss and is currently monitoring the situation, according to a source close to the situation.

The Fed, which is JPMorgan‘s primary regulator, aims to ensure banks are sufficiently capitalized to withstand such trading mistakes, not to prevent them, the source said.

‘STAKES ARE TOO HIGH’

The exact nature of the trading loss is still unclear, although sources said a host of asset managers, arbitrageurs and hedge funds were on the other side of the bet, viewing it as good value and a effective way to insure portions of their portfolio.

Blue Mountain, a hedge fund with offices in New York and London, was among those on the other side of JPMorgan‘s trade, according to two people familiar with the situation.

Dimon will undoubtedly be pressed by investors for more details about what exactly went wrong when he hosts the bank’s annual shareholder meeting on Tuesday in Tampa, Florida.

A national union on Friday urged shareholders to approve a stockholder resolution calling for an independent board chairman at JPMorgan. Dimon currently holds the chairman and CEO titles.

“The stakes are too high to leave Jamie Dimon unsupervised,” said Gerald McEntee, president of the American Federation of State, County & Municipal Employees, which sponsored the proposal. “Dimon denied that the ‘London Whale’ was making risky bets, and now that this has turned out to be a fish story, shareholders need to step in.”

Dimon had parlayed his bank’s reputation as a white knight during the financial crisis into a position as the de facto representative fighting against excessive post-crisis regulation.

“What concerns me is risk management, size, scope,” said Dallas Federal Reserve Bank’s Fisher answer to a question about JPMorgan‘s trading loss. “At what point do you get to the point that you don’t know what’s going on underneath you? That’s the point where you’ve got too big.”

The trader at the center of the storm, Iksil, who graduated in engineering from the Ecole Centrale in Paris in 1991, was not available for comment. The Frenchman, and the Chief Investment Office (CIO) where he works, are known by rival credit traders for taking extremely large positions.

Friends, colleagues and fellow traders describe an unassuming man, a far cry from the brash image normally associated with traders staking huge bets in fast-moving financial markets, including derivatives.

“He’s a really nice bloke. A quiet bloke. He’s not an arrogant trader, he’s quite the opposite. He’s very charming,” one former colleague at JPMorgan said of Iksil, whom he said was married with “a couple of kids” [ID:nL5E8GB68R].

JPMorgan characterized the costly trading strategy that led to the loss as a hedge, rather than as proprietary trade, or a bet with the bank’s own money. But that line has been difficult for regulators and experts to define as they seek to craft the Volcker rule.

One friend and former JPMorgan colleague said Iksil and the team were not carrying out proprietary trading in disguise, and that the unit’s activities were known at the highest levels of the bank.

“The CIO does not do prop trading, let’s be clear on that … It involves taking positions in the form of investments, trades, credit-default swaps, or other, with the aim of rebalancing the risks of JPMorgan‘s balance sheet.

“The information comes from the very top of the bank and I do not even think that the CIO team members at Bruno’s level are given the full picture,” the ex-colleague said.

Iksil was brought into the CIO unit to head its credit desk, an asset class it had not previously covered, a person who worked in the unit said. It built up large credit positions over several years through trades which were vetted by management and the losses now likely resulted from a combination of these trades going wrong, the person said.

The CIO desk had grown rapidly in the past five years and was given free range to trade in a whole range of financial products, the only exception being commodities, they added. The CIO is run by New York-based Ina Drew, who is Chief Investment Officer.

Credit market traders said other banks have comparable functions to JPMorgan’s CIO. The French banks, Citigroup, Deutsche Bank and UBS were all cited as examples of large treasury functions that hedge credit exposures in similar ways.

“The argument that financial institutions do not need the new rules to help them avoid the irresponsible actions that led to the crisis of 2008 is at least $2 billion harder to make today,” U.S. Representative Barney Frank said in a statement.

The Democrat co-authored the 2010 Dodd-Frank financial reform law designed to avoid a repeat of the recent credit crisis.

(Reporting by David Henry in NEW YORK, Rick Rothacker in CHARLOTTE, North Carolina, Dave Clarke in WASHINGTON, Svea Herbst-Bayliss in BOSTON and Vidya Ranganathan in SINGAPORE, Douwe Miedema, Sinead Cruise and Christopher Whittall in LONDON, Lionel Laurent in PARIS; Writing by Alexander Smith and Paul Thomasch; Editing by Alwyn Scott, Jon Boyle, Tim Dobbyn, Gary Hill)

(Reuters) – Chesapeake Energy Corp said it had received a $3 billion loan from Goldman Sachs and Jeffries Group that will give it breathing room to sell assets and close a funding gap this year.

The company, which has been embroiled in a corporate governance crisis that prompted its move to replace co-founder Aubrey McClendon as chairman, said the new unsecured loan will be used to repay money borrowed under its existing $4 billion revolving credit facility.

“This short-term loan from Goldman and Jefferies provides us with significant additional financial flexibility as we execute our asset sales during the remainder of 2012,” McClendon, who will remain as chief executive officer, said in a statement.

The company, the nation’s second largest natural gas producer, said it plans to sell $9.0 billion to $11.5 billion in assets this year.

It expects to close the sales of its Permian Basin property in West Texas and Mississippi Lime joint venture in the third quarter, and said it had “strong interest for prospective buyers” for those two assets.

With the new loan, Chesapeake will have a better position in bargaining with buyers who may have sought to pressure the company into accepting low bids, according to a person familiar with the situation.

The new debt facility, which matures in December 2017, was set at an interest rate at about 8.5 percent, and can be repaid at any time this year without penalty at par value, the company said.

“I would imagine that this is a relatively expensive source of financing for Chesapeake to feel compelled to pursue,” said Bonnie Baha, portfolio manager at DoubleLine, which oversees $34 billion in assets under management.

Still, since Chesapeake was taking the unusual step of getting a loan to pay off an existing revolving debt facility and not securing it with assets, the company did appear to be making a sound deal.

“However, given Chesapeake’s current situation, it’s likely to surmise that someone is going to be left holding the bag on this one,” Baha said.

Wall Street has long benefited from Chesapeake’s financing moves. Prior to the new deal, the Oklahoma City-based company had paid nearly $1 billion in investment banking fees since 2000, with Jefferies taking in $118 million of that money.

Earlier on Friday, Chesapeake said it could delay asset sales in order to preserve cash flow needed to comply with requirements of its existing $4 billion corporate credit facility

Chesapeake faces a funding gap that Fitch Ratings estimated at $10 billion this year. To fill the void and trim its debt, the company aims to raise as much as $14 billion through the sale of assets and other deals.

The company said that although asset sales would help its liquidity, selling properties currently producing oil and gas can reduce its cash flow and the value of collateral used to back its debt.

“As a result, we may delay one or more of our currently planned asset monetizations, or select other assets for monetization, in order to maintain our compliance,” it said in its quarterly filing to U.S. Securities and Exchange Commission.

Michael Kehs, a spokesman for the company, said the statement in the company’s filing did not indicate a change in its efforts to raise money.

“There is no plan to change the asset monetization plan,” he said.

Like other natural gas producers, Chesapeake has suffered an prices for the fuel sank to the lowest levels in a decade, shrinking cash flow and raising worries that companies may need to reduce their estimated value of their properties.

“If natural gas prices fall too low, then they may have to take impairment charges. I expect that’s the case at some point this year,” because of the slide in prices since the end of 2011, said Phil Weiss, an analyst at Argus Research.

Chesapeake has long been one of the industry’s most active buyers and sellers of natural gas properties in the United States, but Wall Street analysts have begun to question whether it can keep striking enough deals to satisfy its cash needs.

The gap between cash coming in and cash going out shows “massive internal funding shortfalls,” according to an April report by Standard & Poor’s.

On Wednesday, Moody’s Investors Service changed its outlook for Chesapeake’s debt to negative from stable, citing “an even-larger capital spending funding gap for 2012,” due both to lower energy prices and higher spending.

Between now and the end of 2013, Chesapeake expects as much as $23.1 billion in costs for outlays such as wells and property, according to the company and analysts.

Chesapeake’s stock tumbled nearly 14 percent to close at $14.81 per share, its lowest level since March 2009, and bringing its losses so far this year to 34 percent.

(Reporting by Matt Daily, Jennifer Ablan, Jon Stempel, Michael Erman, Ernest Scheyder and Anna Driver; Editing by Jan Paschal and Bernard Orr)

NEW YORK (Reuters) – Stock index futures fell sharply on Thursday evening as JPMorgan Chase & Co stunned investors with news that its chief investment office had incurred “significant mark-to-market losses” that it said could “easily get worse.”

JPMorgan‘s stock fell nearly 7 percent to $38.05 in after-hours trading and dragged down shares across the entire banking sector. Its executives called an extraordinary conference call with analysts at 5 p.m. EDT where Chief Executive Jamie Dimon said “egregious” mistakes had been made.

The news from JPMorgan comes at a difficult juncture for the stock market as investors wrestle with heightened concerns about Europe’s debt crisis and signs are emerging that the U.S. economic recovery may be starting to slow.

“When there’s uncertainty, investors‘ first reaction is to sell,” said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut. “This is not the kind of news you expect from a high-quality management team and a well-run bank.”

S&P 500 futures fell 11.6 points and were below fair value, a formula that evaluates pricing by taking into account interest rates, dividends and time to expiration of the contract. Nasdaq 100 futures fell 16.75 points.

If there is nothing to reassure investors between now and the start of trade on Friday the weakness in likely to spill over into the cash market.

Shares of JPMorgan‘s peers fell sharply after hours on the news. Bank of America stock fell 2.9 percent to $7.48 and Goldman Sachs dropped 2.5 percent to $103.65, while Citigroup lost 3.9 percent to $29.45.

The Chief Investment Office is the arm of the bank that JPMorgan has said it uses to make broad bets to hedge its portfolios of individual holdings, such as loans to speculative-grade companies.

BIG SHOCK AFTER A TEPID DAY

The news came after a lackluster day for stocks. The Dow and the S&P 500 eked out a modest gain as investors had dipped back into the market after a weak stretch, but a disappointing outlook from Cisco Systems capped gains.

Cisco Systems Inc lost 10.5 percent to $16.81, its biggest percentage drop since February 2011, making it the heaviest drag on the market. The network equipment maker forecast profits below Wall Street’s estimates, sparking concerns about technology spending.

In a positive development, euro-zone officials said the bloc’s countries are prepared to keep financing Greece until the country forms a new government.

The Dow’s modest rise broke a six-day losing streak for the blue-chip average. But the S&P 500 could not hold enough gains to close above its April low. Still, the S&P has rebounded after falling to a two-month low near 1,340 on Wednesday.

“You are seeing traders and investors come into some of these very oversold sectors and buying on the dips. Then suddenly, the people who are scared decide to start selling into it,” said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont.

“That is what you are seeing today. You are seeing the see-saw between people who are coming in, and adding positions slowly, and people who are saying, ‘The world is coming to an end. I want out.’”

On Thursday, the Dow Jones industrial average rose 19.98 points, or 0.16 percent, to close at 12,855.04. The Standard & Poor’s 500 Index added 3.41 points, or 0.25 percent, to end at 1,357.99. But the Nasdaq Composite Index fell 1.07 points, or 0.04 percent, to close at 2,933.64.

The latest uncertainty surrounding Greece and the euro zone’s sovereign debt crisis helped spark a drop in the S&P 500 in five of the past seven sessions, sending the benchmark index down 4 percent. While the region’s difficulties persisted with the political gridlock in Greece, investors used the market’s declines as a buying opportunity.

The CBOE VIX Volatility Index , used as a measure of investor anxiety, fell 6.2 percent to 18.83. This week, the VIX closed above 20 for the first time in a month in a sign of growing caution.

The number of Americans applying for jobless benefits fell last week, but from an upwardly revised figure from the previous week. The report follows last month’s nonfarm payrolls report, which showed weak employment growth in April.

Signs of softness in the U.S. economy recently have led some investors to err on the side of caution and cut back on sectors exposed to the vicissitudes of the economic cycle.

The Standard & Poor’s 500 could fall 5 percent to 7 percent from its April high, and see “several months” of choppy trading, said Citigroup‘s chief U.S. equity strategist Tobias Levkovich.

“I don’t see that as unreasonable,” he said. “The solutions to some of these things are not imminent. People forgot them and got a little bit too excited.”

On the plus side, News Corp rose after its profit beat expectations late Wednesday and it announced a $5 billion stock buyback. Its stock climbed 4.9 percent to $20.32.

With 449 of the S&P 500 companies reporting results through Thursday morning, 66.4 percent exceeded estimates, according to Thomson Reuters data, compared with more than 80 percent at the start of earnings season.

Volume was 6.75 billion shares on the New York Stock Exchange, the Nasdaq and the NYSE Amex, just above the 50-day moving average of 6.65 billion.

On the NYSE, more than three shares rose for every two that fell, while for the Nasdaq, about seven stocks advanced for every five that fell.

(Reporting by Edward Krudy, Additional reporting by Caroline Valetkevitch; Editing by Jan Paschal)

NEW YORK (Reuters) – The S&P 500 was on track for its first monthly decline since November on Monday after data hinted the U.S. economy may be slowing and Spain‘s fall into recession underscored nagging stresses in the euro zone.

But despite Monday’s declines the picture was not overwhelmingly negative. Last week saw four days of back-to-back gains that helped the index erase steeper losses for the month. The S&P closed above 1,400 for the first time in three weeks on Friday, largely helped by better-than-expected corporate earnings.

Still, a string of economic data is starting to suggest the economy may slow in the summer months and is causing the market to stall just shy of four-year highs. A gauge showing a much sharper-than-expected decline in Midwestern business activity in April was the latest such measure to point to a slowdown.

“On the trading front, in equities, we stepped back to neutral several weeks ago,” said Goldman Sachs in a research note. “Our general view is that the U.S. seems to be slowing – though how much and for how long is an open question – while equity market domestic growth views remain elevated.”

Spain‘s economy sank into recession in the first quarter as deep government spending cuts to reduce a massive deficit and troubles in the banking sector likely delayed any return to growth. Though expected the news highlighted the serious headwinds the world economy faces.

Banks were among the top decliners on Wall Street after Standard & Poor’s cut the credit ratings of 11 Spanish banks on Monday, following its downgrade of Spain last week.

The S&P 500 financial sector index fell 0.7 percent while Bank of America Corp dropped 1.2 percent to $8.15. Shares of Spanish bank Santander traded in New York fell 3.1 percent to $6.27 and are down 17 percent this year.

The Dow Jones industrial average dropped 42.15 points, or 0.32 percent, to 13,186.16. The Standard & Poor’s 500 Index dropped 7.63 points, or 0.54 percent, to 1,395.73. The Nasdaq Composite Index dropped 20.76 points, or 0.68 percent, to 3,048.44.

The S&P 500 is down 0.9 percent so far in April. Early in the month, worries over Europe and the U.S. economy sent the index down over 4 percent for the month.

In earnings news, Humana Inc declined 9 percent to $79.98 after the company, one of the largest providers of Medicare insurance for the elderly, posted a 21 percent drop in profit. The Morgan Stanley healthcare payor index declined 2.1 percent.

Exchange operator NYSE Euronext reported its quarterly profit fell by almost one-third due to a difficult trading environment and costs from its failed merger with Deutsche Boerse . Its shares were off 6.2 percent to $25.39.

According to Thomson Reuters data through Monday morning, of the 297 S&P 500 companies that have reported quarterly results so far, 72 percent topped estimates. A strong earnings season helped lift the benchmark S&P index to its best week since mid-March on Friday.

On the positive side, shares of Sunoco Inc jumped 19.7 percent to $48.95 after pipeline operator Energy Transfer Partners LP said it would buy the company for $5.35 billion in stock and cash.

Barnes & Noble Inc surged about 62 percent to $22.16 after Microsoft Corp agreed to invest $300 million in the bookseller’s digital and college operations. The deal values the Nook and textbook businesses at $1.7 billion.

(Editing by Chizu Nomiyama)

LONDON (Reuters) – Goldman Sachs‘ Jim O’Neill has been approached by Britain‘s finance ministry as a possible candidate to be the next governor of the Bank of England, the Sunday Times reported.

O’Neill, who coined the term ‘BRIC’ in 2001 to describe how the economic clout of Brazil, Russia, India and China would challenge the West’s economic dominance, refused to comment when asked about the report, which did not cite its sources.

The paper said officials from the Treasury, as Britain’s finance ministry is known, had made the approach several months ago.

“No comment. Sorry,” O’Neill told Reuters.

A spokesman for the Treasury also declined to comment, referring to a statement by finance minister George Osborne last week that the search for a new Bank of England chief would not start in earnest until later in the year. Governor Mervyn King is due to retire in June 2013.

Described by the Sunday Times as a surprise candidate, O’Neill combines a distinguished pedigree as one of the world’s most famous economists with over a decade of experience at the world’s most powerful investment bank, Goldman Sachs.

In his current post as chairman of Goldman Sachs Asset Management, O’Neill helps oversee $714.6 billion in management.

The ultimate decision on who will replace King to help guide Britain’s $2.5 trillion economy, which has fallen into its second recession since the financial crisis, lies with Osborne and Prime Minister David Cameron.

“The Governor still has a quarter of his term to serve and he is doing an excellent job,” Osborne told reporters in Washington last week. “When the time comes, the best person for the job will be appointed, whoever he or she may be.”

BANKING REGULATION

Deputy BoE Governor Paul Tucker, former civil servant Gus O’Donnell and Financial Services Authority Chairman Adair Turner have also been tipped as potential successors to King.

Even Bank of Canada Governor Mark Carney, who also once worked at Goldman Sachs, has been cited as a possible governor to take over from King, 64, who detractors say reacted too slowly to the global financial crisis.

The decision on a governor is complicated by proposals to increase the power of the Bank of England, founded in 1694. They are yet to be finally approved by parliament, but would give the bank sweeping new powers over the financial system and Britain’s banks to help protect Britain from another crisis.

That will extend the next governor’s job way beyond managing monetary policy to the complexities of banking regulation.

Banking knowledge will be needed but amid popular anger against bankers and their bonuses, O’Neill’s links to Goldman could be problematic for Osborne.

However, O’Neill, 55, cuts a rather different figure to the popular image of a voracious investment banker.

The son of a postman, he went to a state school, rather than a prestigious fee-paying school like Osborne and Cameron, and retains a Mancunian accent from his childhood in Britain’s northern city of Manchester. He once tried to buy Manchester United football club.

In a research paper on April 20, five days before data showed Britain had slipped into recession, O’Neill said the UK economy was in better shape than official reports suggested.

“I suspect again that the UK economy is stronger than many believe and certainly than much of the official data is suggesting,” O’Neill wrote.

(Additional reporting by David Milliken; Editing by Susan Fenton)

LONDON (Reuters) – Human Genome Sciences Inc said on Thursday its long-time partner GlaxoSmithKline Plc had made an unsolicited proposal to buy it for $13.00 per share in cash, a move underscoring the rapid pace of deal-making in pharmaceuticals.

With 198.5 million shares in issue, the bid would value Human Genome at around $2.6 billion. The stock closed on Wednesday at $7.16.

Human Genome said it did not believe the offer reflected the value inherent in the company. It has hired Goldman Sachs and Credit Suisse to assist with exploration of strategic alternatives.

A spokeswoman for GSK, Britain’s biggest drugmaker, said the company would issue a statement shortly.

(Reporting by Ben Hirschler)

(Reuters) – Goldman Sachs Group Inc surprised Wall Street on Tuesday, reporting better-than-expected profit and dialing back risk-taking in ways that are uncharacteristic for the traditionally aggressive investment bank.

In fixed income, currency and commodities trading (FICC) — where Goldman has been known for lucrative, if risky, bets — the bank highlighted interest-rate products as a bright spot and said other major businesses reported lower revenue.

Goldman’s average daily value at risk – a key measure of risk-taking at Wall Street banks – declined by 16 percent from the year-ago period and 29 percent from the 2011 fourth quarter.

In another move that made the Wall Street firm look a little more like the less profitable, run-of-the-mill commercial banks, Goldman raised its dividend 31 percent to 46 cents per share.

It is only the third dividend increase since the bank went public in 1999. It last raised the dividend in 2006. Goldman executives have repeatedly said they prefer returning money to shareholders through stock buybacks.

The shift toward a lower risk profile comes as Goldman and other investment banks have found their profits under pressure from continuing stress in the capital markets in recent years and new regulations aimed at reducing risk at such firms, including higher capital requirements, restrictions on trading, and curbs on investments in hedge funds and private equity.

But investors had been expecting Goldman to find ways to increase profitability and post even stronger results, especially after major rivals JPMorgan Chase & Co and Citigroup Inc outperformed expectations in the first quarter.

Goldman’s revenue from FICC was $3.5 billion in the first quarter, down 20 percent from a strong year-ago quarter but more than double the fourth quarter. Still, UBS analyst Brennan Hawken described the revenue as “light” against his forecast of $4.2 billion.

Revenue was down across most of Goldman’s businesses compared with a year earlier, except for financial advisory and stock trading for clients.

Its investment management division was perhaps the weakest business, reporting net outflows and lower revenue. Analysts had expected gains at money-management firms across Wall Street because of a stock-market rally during the first quarter.

“We believe the market was expecting a strong quarter, particularly after seeing the capital markets revenue beats at the universal bank reports thus far,” said David Trone, an analyst at JMP Securities. “Add the investment management difficulties and Goldman shares could be in a tug-of-war today.”

The shares were little changed in morning trading on the New York Stock Exchange, up 12 cents to $117.85.

PROFIT BEATS EXPECTATIONS

Goldman earned $2.1 billion, or $3.92 per share, for the first quarter. In the year-ago period, which was generally stronger for investment banks‘ trading and banking activity, it earned $4.38 per share, excluding a one-time cost for buying back preferred stock from Warren Buffett’s Berkshire Hathaway Inc.

Analysts had expected $3.55 per share, according to Thomson Reuters I/B/E/S.

In lieu of higher revenue, Goldman also made further cuts to staffing and expenses to boost its bottom line, in what is expected to be the final stretch of an aggressive cost-cutting program that began during the second half of 2011.

The bank set aside $4.4 billion for compensation and benefits during the first quarter, down 16 percent from a year earlier. It also reduced its workforce by 900 employees, or 3 percent.

(Additional reporting By Rick Rothacker; editing by Paritosh Bansal, Dan Wilchins and John Wallace)

(Reuters) – Goldman Sachs Group Inc reported higher-than-expected quarterly earnings thanks to aggressive cost-cutting and strong investment banking and trading revenues, and the Wall Street bank raised its dividend.

Goldman earned $2.1 billion, or $3.92 per share. In the year-ago period, which was generally stronger for investment banks’ trading and banking activity, it earned $4.38 per share, excluding a one-time cost for buying back preferred stock.

Analysts had expected $3.55 per share, according to Thomson Reuters I/B/E/S.

Goldman said it would raise its quarterly dividend to 46 cents per share from 35 cents.

Goldman shares were down 1 percent in premarket trading.

Revenue was down across most of Goldman’s businesses except for financial advisory and equities client execution.

But bond-market businesses were a bright spot compared to the 2011 fourth quarter, when markets were still reeling from the European debt crisis. Revenue more than doubled in debt underwriting and fixed-income, currency and commodities trading.

“Because client activity remains relatively low in certain areas, especially in parts of Investment Banking, we believe that our mix of businesses gives the firm significant room for revenue growth as economic and market conditions continue to improve,” Chief Executive Lloyd Blankfein said in a statement.

Goldman also made further cuts to staffing and expenses in what is expected to be the final stretch of an aggressive cost-cutting program that began during the second half of 2011.

The bank set aside $4.4 billion for compensation and benefits during the first quarter, down 16 percent from a year earlier. It also reduced its workforce by 900 employees, or 3 percent.

(Reporting By Lauren Tara LaCapra; editing by John Wallace)