Browse by Tags
-
Posted
Apr 21 2008, 01:01 PM
by
Matt Koppenheffer
Rating:
After watching relatively positive reactions to horrible earnings reports from the likes of Citigroup and Merrill Lynch last week, investors are far less chipper about the news out of Bank of America today. So it wouldn't be surprising if investors watching the financial sector are wondering when bad is good and when bad is just... well, bad.
The beginning and end of that story is expectations. Think about it this way: say you are expecting a meteor to crash into earth and create an ice age that will end life as we know it. The following week you wake up to hear that the meteor will end up missing earth, but you find that somebody has stolen your car. On balance you're still probably pretty psyched about the situation.
In that same way, Citigroup and Merrill have had some very pessimistic expectations thrust on them. In fact, it's been so bad for Citi that, as Charley Blaine pointed out last week, Apple is now worth more as a company than Citi. In a situation like that, investors are really pretty impressed with anything north of abject failure.
Read More...
-
Posted
Apr 14 2008, 02:33 PM
by
Matt Koppenheffer
Rating:
The details of Wachovia's first-quarter report were unfortunately familiar enough to border on dull. The quarterly loss was $350 million, brought on by some $5 billion in asset impairment and loan related charges. It's also quickly moving to make sure it has enough liquidity by cutting its dividend and raising $7 billion of new capital.
What's more interesting to consider is the fact that Wachovia, like many of its competitors, steered its financial ship directly toward the oncoming storm in the twilight hours of the housing boom. In May of 2006, Wachovia agreed to purchase Golden West Financial, a huge California savings and loan. Though the S&L was very well respected, the deal was fantastically ill-timed as it gave Wachovia tremendous exposure to the bubblicious California real estate market.
Read More...
-
Posted
Apr 07 2008, 11:12 AM
by
Matt Koppenheffer
Rating:
Washington Mutual chief executive Kerry Killinger might as well be standing in front of a "Mission Accomplished" banner today. WaMu shares are skyrocketing on hopes of a $5 billion investment from private equity shop TPG that would give the bank a nice cushion to deal with its massive lending missteps.
While Citigroup, Bear Stearns, and Merrill Lynch may grab most of the headlines because the magnitude of their losses was so great, WaMu has managed to lose an impressive amount of money for a bank of its size. WaMu finished 2007 with a loss of $67 million thanks to loan loss provisions above $3 billion and charge-offs of $1.6 billion.
Meanwhile, the company seems to care far more about Mr. Killinger than its shareholders. After reporting the dismal results for 2007 -- results that took the stock down 70% from where it started the year -- the board of directors concocted a compensation plan that would ignore the effects of the bank's potential loan losses, foreclosed real estate, and restructuring. So in the coming year, while investors will continue to feel the effects of further losses, the executive team can rest easy that their payout won't be crimped by their past strategic decisions.
Read More...
-
Posted
Apr 04 2008, 01:28 PM
by
Matt Koppenheffer
Rating:
Swiss bank UBS has made it abundantly clear that US banks aren't the only ones that can create massive write-downs. The bank has taken a staggering $37 billion in losses, and is headed out to the market to raise new money -- despite the fact that its stock is roughly half of its 52-week peak.
Things have gotten so bad that former UBS president Luqman Arnold has stepped in as an activist investor hoping to change the bank's pitch from "you and us" to "you and us and them." Like the rebellious teenager that set fire to the garage, it's UBS' investment banking division that has caused all the heartache for the venerable bank and Mr. Arnold wants to kick it out of the house.
However, what Mr. Arnold has made known is that he's not in this to take control of UBS -- he's not interested in a chairmanship or executive role. His primary focus is creating a good return on the sizeable position that his investment firm, Olivant, has in UBS.
Read More...
-
Posted
Jan 18 2008, 04:12 PM
by
Matt Koppenheffer
Rating:
Earnings have been pouring out of the financial sector all week and the picture hasn't been pretty. "Write-down" has commanded a starring role in this quarter's earnings reports dashing ahead of "earnings per share" as what investors seem to care about the most.
Citigroup, whose stock just can't seem to find a bottom, seems to have been the worst of the bunch. In an interesting twist, much of the pessimism over the company's quarter came because Citigroup only wrote down some $18 billion and didn't propose as many job cuts as the market was hoping.
CAPS still rates Citigroup just two stars out of five, but there has been some bullish sentiment after the company's earnings release. Michaelkoh1 rated Citi's stock an outperformer and noted that "2007 will be tough, and there will likely be more pain for equity investors as the financials muddle through this year, but this is a strong diversified franchise and will outperform the market over the next 2 to 4 years."
Read More...
-
Posted
Dec 28 2007, 01:41 PM
by
Matt Koppenheffer
Rating:
There's no doubt that there's some serious blood in the water when it comes to the financial sector. Bank of America is down 23% over the past year, Morgan Stanley has lost 35%, the behemoth Citigroup has been darn near cut in half, and Washington Mutual… let's just say that things are grim at WaMu.
Blood continues to spill too. There are no doubt more big write downs yet to come to light and the scramble that banks will have to make to stay well capitalized will put even more pressure on the stocks. Yesterday a Goldman Sachs analyst suggested that Citigroup may have to slash its dividend by as much as 40% to cope with the write downs on the horizon
Read More...
-
Posted
Dec 12 2007, 03:42 PM
by
Matt Koppenheffer
Rating:
Hitting the wires midday today was a raft of banking downgrades from investment bank Merrill Lynch. Among the banks downgraded were Bank of America, JP Morgan, and Wachovia. Bank of America and JP Morgan were both cut to neutral, while Wachovia was dropped to sell.
Lately there's simply been nowhere to run when it comes to major banking stocks. Along with write-downs announced in November, Bank of America has not had much in the way of positive comments about the economy. And of course Wachovia doubling its loan loss estimates and Washington Mutual slashing its dividend hasn't helped either.
But what of the downgrader? Merrill Lynch has had an exceedingly rough year and, though it has bounced from its recent bottom, it's down 40% from its 52-week high. On The Motley Fool's CAPS service, there are some players that think Merrill, with new CEO John Thain, can find its way back into investors' good graces. However, the two-star rated stock still sports a good deal of dour commentary.
Read More...
-
Posted
Oct 22 2007, 12:40 PM
by
Matt Koppenheffer
After a week of fairly consistent negative coverage of the banking sector, investors can likely find a boatload of reasons why they should avoid bank stocks. From the big guys like Citigroup and Bank of America to some of the relatively smaller names like Washington Mutual, the industry has been looking downright sorry.
But is it time to write off any stock that sports the word "bank" in its description? Players in the CAPS community seem to think not. That's not to say that they have a radically higher opinion of the major banks I mentioned above -- out of a possible five stars Bank of America has a middling three star rating, while Citigroup and WaMu both sport two stars. They're not any more positive on the big investment banks either. Goldman Sachs has been rated three stars, but Morgan Stanley, Lehman Brothers, and Bear Stearns all carry two stars or less.
Looking outside of the US, though, CAPS players have identified a number of foreign banking stocks they think are worth of a full five star rating.
Read More...
|
