ALL FINANCIAL FOREX NEWS on ONE PAGE » Banking

Pick-Me-Up For ING – US-FOREX.US

Forex-Publisher — Wed, 12 Aug 2009 10:46:54 +0000

ING Group got pummeled in the market on Wednesday as soon as it released its second-quarter results. Not surprising, since the Dutch insurance giant had missed big on net profit expectations and posted a surprise loss at its banking division. But ING, whose fortunes are intertwined with those of both of the real economy and financial markets, is still displaying some encouraging signs. First, shareholders’ equity, or ING’s total assets minus its liabilities, increased to 22.3 billion euros in the second quarter, from 19.4 billion euros in the last quarter. The company can thank last quarter’s rally in equity and debt markets for that, even though it didn’t benefit as much as it could have. A short position on S&P index futures proved to be an incorrect bet, and ING booked a 346 million-euro loss because of it. But if ING
was being too conservative in its equity trading, it has been anything but that when it comes to cost cutting. The company, which is an amalagamation of banking, insurance and asset management divisions, had said in January that it would cut 7,000 jobs, but on Wednesday it had cut more than 8,000 already. It also increased its cost-savings target to 1.3 billion euros , from 1 billion euros .The ramp up looks like the mark of new chief executive Jan Hommen, who recently told Forbes that ING wanted to change into a “different organization.” Hommen is in the middle of finding buyers for a handful of the bank’s assets so that it can raise 8 billion euros to help it pay back a 10 billion euro capital injection from the Dutch government. So far the market knows that ING wants to sell its private banking assets in Switzerland and Asia, and is hoping to fetch around 1 billion euros for them. It has also already raised 1.4 billion euros by selling its 70% stake in ING Canada and will reportedly get 350 million for its annuity and mortgage business in Chile. Though little else has been reported, ING said Wednesday that it had identified the rest of the businesses it intended to sell. This will lend some confidence to investors, much needed at a time when ING is still making significant write-downs to its real estate portfolio. The big disappoint for the market on Wednesday wasn’t just that ING’s 71 million euro net profit significantly missed forecasts, but that it also lost 584 million euros on the deteriorating value of its property assets.
Such is ING’s exposure to economic conditions, which it expects to “remain challenging.” Nico Van Geest, an analyst at Keijser Capital in Amsterdam, says that if factors like house prices and unemployment improve, ING can benefit in the same way it has received a boost from the mild recovery in financial markets. ING has, in fact, said that it is more tied to the fortunes of the real economy than to the financial markets, he points out. “You get a huge leverage in the [profit and loss] if the economy develops,” he said. Van Geest calculates that shareholders’ equity at ING implies a book value of 11 euros , which is well above the current share price. He added that he was now considering upgrading the stock to “buy” from “neutral.” Shares of ING declined by 5.4%, or 49 euro cents , to 8.62 euros on Wednesday afternoon in Amsterdam.

Bove Says Sell Bank Stocks – US-FOREX.US

Forex-Publisher — Tue, 11 Aug 2009 19:46:36 +0000

Dick Bove, vice president of equity research at Rochdale Research, thinks the banking industry is an attractive long-term investment, but for now he believes bank stocks are running on fumes and recommends investors take short-term profits.”The issue as I see it is that bank earnings will not improve in the third or even fourth quarter this year,” Bove said. “Many of these companies will show losses. The rational investor would step away from psychology at this point and take some profits. I suggest this even though I am not changing the long-term buy ratings on my favorite stocks.” In May, Bove said that the combination of more traditional banking operations with the economic recovery will lead to explosive earnings growth and unusually strong stock price performance. The banking industry, as measured by the SPDR KBW Bank
exchange-traded fund, fell 3.8%, in afternoon trading on Tuesday, while the broader-based Financial Select Sector SPDR
ETF slid 3.0%. Regional banks were especially hurt Tuesday, as the SPDR KBW Regional Banking
ETF fell 5.0%. Individual companies like Citigroup
fell 5.8%, while Bank of America
dropped 3.9%”Psychology toward the banking group had moved dramatically along with earnings,” Bove said. “Each shift in psychology carried with it change in how investors believed they should value banks.” Currently, the recent rise in the stocks does not appear to be driven by a change in the near-term earnings outlook, Bove asserted, but instead has been driven by a change in expectations: “Thus, it is our belief that these stocks are trading on fumes and not reality,” Bove said.
Though financials still make a good long-term investment, they’re probably not, if Roche is right, the place to keep money that will be needed soon. Now’s a good time for investors who don’t have three to five years to wait to take profits off the table.

Beijing Woos British Homeowners – US-FOREX.US

Forex-Publisher — Tue, 28 Jul 2009 16:46:03 +0000

Meet the British homeowner’s newest lender: China.Bank of China, one of the country’s four, state-owned banks, is ramping up its lending business in the U.K. as British banks remain cautious in their lending.The bank, which had already been offering loans to the Chinese community in the U.K., will begin offering mortgages for landlords, known in Britain as “buy to let” mortgages, tracking 3.5% above the Bank of England base rate. It is also offering regular residential mortgages at 2.5% above the 0.5% rate, a spokesperson for the bank confirmed in an e-mailed response to Forbes. “Our aim is to translate the global strength of our branch into a household name in the U.K.,” she added. British lenders have been criticized for failing to step up their lending to boost the British economy, despite the pressure being exerted on them to do so by Gordon Brown’s Labour government. Gross mortgage lending in June was 48% below last year’s figure, according to the Council of Mortgage Lenders’ latest data.
“[British] banks aren’t stepping up lending but focusing on shoring up their balance sheets,” said Jane King, senior mortgage advisor at Ash-Ridge Private Finance in London. She added that the rates being offered by Bank of China were “extremely good” for tracker mortgages.
One area where the Bank of China could have a big impact is on the buy-to-let sector. Buy-to-let mortgages in particular have taken a hit, falling to 6% of mortgage lending in the first quarter of the year, from double that figure a year ago, according to the CML data. “Many lenders are simply not lending to professional landlords, so there is a lack of competition in this area and a need for alternatives,” said Ian Butler, a mortgage broker at Connect Mortgage Solutions, one of the firms that will be offering the Bank of China mortgages. “There is a big shortage of capacity in the market at the moment,” said Leigh Goodwin, an analyst at Fox-Pitt, Kelton in London. “A lot of lenders are exiting the business and those in it, such as Paragon, aren’t lending anymore.” Troubles in the British buy-to-let sector were thrown into the spotlight late last year when the British government took control of mortgage lender Bradford & Bingley’s 50-billion-pound mortgage and lending division after a sharp drop in house prices sent bad loans soaring. The Bank of China will be taking an ultracautious approach in its lending, it appears. According to its spokesperson, “as part of the underwriting process, applicants will be invited to a face-to-face interview” at one of the bank’s branch networks in London, Manchester, Birmingham and Glasgow.

How Ben Will Free The Banks – US-FOREX.US

Forex-Publisher — Wed, 22 Jul 2009 19:45:57 +0000

Federal Reserve Chairman Ben Bernanke has tended to the largest banks in the U.S. the way a park ranger deals with an endangered species. He caught them, took them in and nursed them back to health. Now he has to release them back into the wild. He’s hoping for an easy transition.There are more than a dozen different programs established by the Fed and Treasury Department to confront the crisis in the banking industry, and there is no one way the government plans on working out of them. Yet, the government isn’t interested in making abrupt movements, which would disrupt the still fragile sector. For example, the Fed and the Treasury have made banks less willing to use the Temporary Liquidity Guarantee Program by indicating that firms will be more highly regarded if they issue debt that isn’t guaranteed through the program. The method appears to be working. Though the program is still in effect, there has been a greater hesitancy to use it.Banks like Citigroup
, Wells Fargo
and Bank of America
flocked to these programs during the financial crisis, even though some claimed at the time that it wasn’t entirely necessary – now the banks are being weaned off. Brokerage firms such as Goldman Sachs
and Morgan Stanley
went so far as to change their status to a “bank-holding company” to ensure their eligibility. General Electric
‘s financial arm GE Capital was granted exemption, and actually became the largest recipient of the TLGP program, though was not given additional oversight. When the Fed does finally release the banks, investors should focus on credit quality first and then earnings. Most of the Fed’s actions have been credit-centric, after all. Banks with the most credit risk on their balance sheets will have the most difficult time adjusting as the Fed returns to normalcy.Bernanke’s semi-annual monetary policy report to Congress was atypical. The minutes from the June Federal Open Market Committee meeting were released beforehand, and the chairman beat committee members to a discussion on an “exit strategy” as well by publishing an op-ed on the matter in the Wall Street Journal.
Bernanke stressed that the central bank’s extraordinary measures will remain in place for the foreseeable future. Though, when the time comes, the exit strategy will focus on the Fed’s balance sheet, which has grown to massive proportions. The primary tool used be interest on reserves. Bernanke also mentioned a number of measures to reduce the level of reserve balances, including draining reserves through reverse repos. The Fed could also offer term deposits on banks, said Mike Feroli, a senior economist at JPMorgan Chase, which would function like certificates of deposits do for retail savers.Bernanke avoided discussion of the federal-funds rate, as well as whether the Fed would extend its Treasury purchase program when the 300 billion of purchases is completed in September. Joe LaVorgna, chief U.S. economist at Deutsche Bank, believes the Fed will not raise the federal funds rate until unemployment begins to substantially decrease, adding that before that happens, the balance sheet will be in “runoff mode”.

Trust In Northern Trust – US-FOREX.US

Forex-Publisher — Tue, 21 Jul 2009 20:45:56 +0000

Times have been tough for Northern Trust, which manages money for pensions, endowments and wealthy individuals and performs custodial and trust services. Like other asset managers, the past year’s dive in the markets took away a chunk of business, since it reaps fees based on the size of clients’ portfolios. On top of that, some clients have accused Northern Trust of imprudently lending their stocks out for a little extra income. Analysts expect Northern Trust
to turn in second-quarter profit of 55 cents a share, excluding certain items, when it announces results before trading on Wednesday. That would be a drop of 59% from last year’s second quarter and slightly below the first quarter’s 61 cents a share. But revenue should be up from last quarter.Citigroup analyst Greg Ketron rates the stock a “hold” and writes that he expects to see lower fees from securities lending and currency trading this quarter. The sale of 17 million shares of stock to raise capital and the need to repay government loans will also hurt earnings this year, he writes.But there’s a bright side Northern’s market exposure. Its trust duties- mundane but important custodial services for charities, endowments and others-provide a stable source of revenue. That has helped trust banks, including Northern Trust and Bank of New York Mellon
, hold onto some of their stock market value during the crisis. In the last year, Northern’s shares fell 17% and BNY Mellon’s dropped 18%. Compare that to some mutual fund companies like Janus Capital
and T. Rowe Price
. Those numbers are even more striking when you consider that the stock market from March to June gave a huge boost to many asset managers.Northern Trust is also one of the biggest purveyors of so-called passive investment strategies for institutional clients. These low-cost index funds track the markets, instead of trying to beat them. That emphasis helped Northern avoid some of the toxic assets like mortgage-backed bonds, that have badly damaged the returns and reputations of some fund managers. Index strategies are also gaining favor with institutions looking to cut their fees. Thomson Reuters contributed to this report.

BlackRock Looks Solid – US-FOREX.US

Forex-Publisher — Mon, 20 Jul 2009 22:46:03 +0000

BlackRock’s strength should be on display Tuesday when the asset management firm releases its second quarter report.Wall Street analysts are, on average, expecting BlackRock
to report second quarter earnings of 1.58 per share, well shy of the 2.14 it recorded in last year’s corresponding period. Shares of the asset management firm rose 2.8%, or 5.03, to 184.82 on Monday, while over the past 12 months, BlackRock’s seen its stock increase 37.8%. Peers such as State Street
have increased 24.1%, while Legg Mason
has grown only 13.8%. The Financial Select Sector SPDR
exchange-traded fund has slipped 2.2%.”We’re expecting more feedback from its Barclays announcement and continued strong performance from the BlackRock Solutions Group,” said Macrae Sykes, an analyst at Gabelli & Co. BlackRock recently agreed to purchase Barclays
unit Barclays Global Investors, giving it 3.1 trillion in invested assets, as well as its exchange-traded-fund business iShares. Last month, PNC Financial Services
also agreed to purchase 506 million to help finance its purchase of the Barclay sunit. Media reports have also surfaced that it and Ameriprise Financial
may purchase pieces of Bank of America
‘s Columba Management, Pensions & Investments.Like Goldman Sachs
or JPMorgan Chase
, BlackRock appeared to has come out of the financial crisis in a relatively stronger position. BlackRock has also risen as an important player in the nation’s recovery, as it recently came forward with plans to raise between 4 billion and 5 billion for a federal program that deals with toxic assets.

State Streets Status – US-FOREX.US

Forex-Publisher — Mon, 20 Jul 2009 20:46:04 +0000

For money managers, as much as for any investor in the markets, the second quarter of 2009 brought some welcome relief. With the S&P 500 up 15% from April through June, the profits of companies that manage assets for institutions and individuals are likely to have rebounded from the first quarter’s dismal results. For State Street Corp., which reports earnings Tuesday, specializing in passive investment strategies that track the broad market instead of trying to beat it could provide a leg up on the competition this quarter.Many actively managed funds lost big in the market crash that followed Lehman Brothers’
bankruptcy. State Street manages money for large institutions such as pensions and endowment. Sick of paying higher fees for active management that didn’t shield them from the crash, a growing number of institutions are looking at passive strategies for their investments in U.S. stocks, in particular. State Street could benefit from that shift. Analysts expect the Boston firm to report second-quarter earnings of 97 cents a share, down from 1.39 last year. But Citigroup analyst Greg Ketron thinks margins and sales are growing and rates the stock a buy, figuring it’s worth 57 a share, compared to the current price of 48.11. The firm will earn profits of 4.30 a share this year, writes Ketron. That’s higher than the consensus among Wall Street analysts, who think profit will be just 3.91 a share.The rebounding stock market will also help earnings since, like most money managers, State Street takes a percentage of the assets it manages each year. The more valuable those assets, the more fees State Street reaps. Much of that rebound is already priced into the stocks of asset managers: State Street is up 41% in the last three months. However, as the threat of a prolonged recession recedes, clients could begin to pour money back into riskier-and more expensive-investments like stocks.Some evidence of that is already showing up. According to mutual fund tracker Morningstar, investors put 112 billion into mutual funds in the second quarter, compared with 6.9 billion in the first three months of the year. That figure excludes safe, and low-cost, money market funds. For State Street, which fared much better than some rivals during the financial crisis, the return to confidence in the markets could be doubly sweet.Thomson Reuters contributed to this report.

BBT Looks Strong But Questions Remain – US-FOREX.US

Forex-Publisher — Thu, 16 Jul 2009 22:46:07 +0000

BB&T is expected to announce a strong second quarter Friday, but Wall Street isn’t convinced its credit losses are as clean the regional bank’s books suggest.”BB&T
will probably report a decent quarter tomorrow,” said FBR Capital Markets analyst Paul Miller, who expects earnings of 17 cents per share. “I wouldn’t be completely shocked if they reach the 20-range, which could happen if they get meaningful margin expansion.” Wall Street, on average, is expecting earnings of 28 cents per share, according to Thomson Reuters.BB&T has a solid franchise, and appears to have done a great job at keeping losses low. Paul Miller is skeptical though, and expects its credit losses will catch up with normal levels. It would be difficult for a retail lender like BB&T to avoid industry-wide problems related to consumer loans and rising national unemployment levels. In a recent report, Miller warned of exposure that includes 7.5 billion in residential acquisition, development and construction loans. “We are also concerned about management’s guidance for losses to improve in the second half of 2009,” Miller said, “and believe that losses in Atlanta, specifically, will be more material than management expects.”Since the beginning of the year, BB&T shares have lost 18.7% of their value, while competitors such as SunTrust Banks
and Regions Financial
have tumbled 42.9% and 47.0%. On a whole, the regional banking sector has fallen 35.2%, as measured by the SPDR KBW Regional Banking
exchange-traded fund.
Goldman Sachs
and JPMorgan Chase
have reported banner quarterly reports, but details offer a more complicated picture. For example, at JPMorgan, loans fell and deposits dropped from the previous quarter, meanwhile the pace of non-performing loans appeared to increase. CIT Group
, a major small- and medium-size lender, meanwhile is close to filing bankruptcy protection.

BofAs Consumer And Real Estate Woes – US-FOREX.US

Forex-Publisher — Thu, 16 Jul 2009 21:46:20 +0000

Paul Miller of FBR Capital Markets expects strong top-line numbers from Bank of America
on Friday, especially coming out of Merrill Lynch. “It was much more active in the second quarter,” Miller said. “Trading revenue from Goldman Sachs
and JPMorgan Chase
were strong, and I don’t expect anything different from BofA.”On average, Wall Street analysts expect BofA to report earnings of 28 cents per share. JPMorganChase and Goldman both reported impressive second quarter results. The difference between BofA and JPMorgan though is that BofA has more consumer credit exposure. Further, Miller noted, unlike JPMorgan, BofA is loaded with exposure to the troubled commercial real estate market. Friday will also be a major test for BofA’s chief executive Ken Lewis, whose leadership has been brought under question by shareholders. BofA has fared relatively well over the course of the year, falling “only” 6.8%, while other big banks like Wells Fargo
and Citigroup
have slid 16.0% and 54.7%, respectively. JPMorgan meanwhile has risen 13.3%. The SPDR KBW Bank
exchange-traded fund, which follows the banking industry, has fallen 15.5% in 2009, while the Financial Select Sector SPDR
ETF has slipped 3.4%. BofA’s report comes as its acquisition of Merrill Lynch is under scrutiny. On Thursday, former Treasury Secretary Hank Paulson revealed he pressured Lewis to not back out of BofA’s acquisition of the troubled brokerage house. In a lengthy hearing before Congress, Paulson defended his actions as appropriate, and in the best interest of both the country and the two companies.
Meanwhile, Representative Ed Towns, Chairman of the Committee on Oversight and Government Reform, announced on Wednesday that he sent a letter to Lewis regarding recent reports that BofA is not planning to pay the government for financial protection it provided against the bank’s toxic assets. Towns said he has requested Lewis provide him an update on the dispute by Thursday.

Citigroup Fights To The Finish – US-FOREX.US

Forex-Publisher — Thu, 16 Jul 2009 21:46:12 +0000

Citigroup, which is set to report second-quarter earnings on Friday, has been trying to come out ahead by handling operations and troubled assets, not to mention reshuffling management. But will it pay off?Wall Street’s wide range of projections average out to a loss of 37 cents per share. Jason Goldberg of Barclays Capital is optimistic about Citigroup’s quarter, expecting an operating loss of 25 cents per share. Goldberg’s outlook jumps to a gain of 85 cents when including one-time charges, namely the 2.8 billion it accrued from Smith Barney’s joint venture with Morgan Stanley.”We’re constructive on the bigger banks and kind of take a pause when looking at the more regional, midsize players,” Goldberg said. “The bigger banks are benefiting from a good revenue environment amid a strong capital markets backdrop, good mortgage banking activity and a steep yield curve.”Since the beginning of the year, Citi’s shares have tumbled 54.7% over operational struggles and a number of managerial changes. Other big banks like Bank of America
and Wells Fargo
have fallen 6.8% and 16.0%, respectively, while JPMorgan Chase
has risen 13.3%. The SPDR KBW Bank
exchange-traded fund, which follows the banking industry, has fallen 15.5% in 2009, while the Financial Select Sector SPDR
ETF has slipped 3.4%. Citigroup’s report comes on the same day as Bank of America, and follows strong results from JPMorgan and Goldman Sachs
.