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Posted
Apr 14 2008, 02:58 PM
by
Douglas McIntyre
Rating:
Early indications from companies like Wachovia and General Electric show that the last half of March may have been tougher on bank earnings than Wall Street expects. Bloomberg recently reported that Citigroup, JP Morgan, and Wells Fargo could all miss consensus estimates. But by how much?
A look at the spread of Q1 estimates gives some hint about how far off actual numbers could be compared with investor expectations. At Citigroup, among 15 analysts polled by First Call the average EPS estimate is a loss of $.95. But, the lowest estimate is a loss of $2.24. At JP Morgan, the average figure from fourteen analysts is $.66, but the worst case is a loss of $.11. For Wells Fargo, twenty-three analysts have an average forecast of Q1 EPS at $.57, but the low number is $.45.
The huge discrepancy among the numbers should be troubling to shareholders because recent information would argue that share prices for most banks and brokerages may still be way too high.
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Posted
Mar 25 2008, 03:58 PM
by
Charley Blaine
Rating:
Al Copeland died on Sunday. You might not know the name. In Louisiana and certainly around New Orleans, he was about as well known as anybody both for the chicken you can get at Popeyes Famous Fried Chicken, the chain he started, and for his lavish, complicated and exuberant lifestyle.
He liked getting married. But all four of his marriages ended in divorce -- often acrimoniously. He liked Christmas. His house along Lake Pontchartrain in Kenner, La., was so lit up with lights at the holidays that airline pilots would use it to line up their approaches to the airport.
He liked fast cars and fast boats. He carried on a fun feud over the decor of one of his restaurants with no less than Anne Rice, the author of "Interview with the Vampire."
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Posted
Mar 10 2008, 04:30 PM
by
Douglas McIntyre
Rating:
The first quarter should be another brutal right of passage for big investment banks. Citigroup is forecasting that they will have to write-down another $9 billion in Q1. According to Reuters the damage will be "primarily driven by additional leveraged loan and mortgage-related losses."
Among the hardest hit firms will be Goldman Sachs which is facing as much as a $3.2 billion write-off, Merrill Lynch, which may post $2.9 billion in write-downs, and Morgan Stanley where the figure could be as high as $1.2 billion.
If the numbers are correct, it may open the door for another round of raising funds for the brokerages. Now that most of them have called on sovereign banks overseas, it will be essential that U.S. private equity firms or Treasury help them out of the mounting mess.
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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."
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Posted
Nov 15 2007, 09:12 AM
by
Matt Koppenheffer
Well, it's official, New York Stock Exchange chief John Thain is stepping up to the plate to be the new CEO of Merrill Lynch after the recent ousting of Stan O'Neal.
Though Merrill has taken a beating lately at the hands of its big credit portfolio write-downs, there is a lot of value still there in the company. Like many of the other broad-line brokerage houses, Merrill has had success in areas like investment banking and asset management overshadowed by overwhelming failure on the fixed income side.
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Posted
Oct 25 2007, 12:28 AM
by
Jon Markman
There's an awesome story in the Wall Street Journal tonight about the guy who appears to have been a key driver of Merrill Lynch's disastrous decision to become No. 1 in the underwriting of collateralized debt obligations, or CDOs.
The story explains the birth of CDOs and how they were sold as a way for fund managers to obtain more dividend income with just a little extra risk during the mid-2000s when Treasury bill yields were low. It tells the tale through the perspective of pioneering salesman Christopher Ricciardi. The story explains how the exotic derivatives -- which heap leverage on top of leverage on top of leverage -- moved down the food chain from smart-money managers in Manhattan who may have really understood the risks they were taking, to European and Asian managers who didn't really understand them very well, and finally, near the end, to individuals who really didn't have a clue.
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Posted
Oct 24 2007, 04:28 PM
by
Matt Koppenheffer
Rating:
The earnings announcement from Merrill Lynch found few friendly ears on CAPS. The company, which just three weeks ago revealed that it would be writing down $4.5 billion in loans, said, "Whoops, we actually meant $7.9 billion!"
I mean, come on Stan!
CAPS All-Star InvestorDeb summed it up really well:
Stan O'Neil bought a subprime lender at the top of the market. That's the good news...
The Oct. 5 pre-announcement was just WRONG at best, and DECEPTIVE at worst. Today, his comments on the conference call ruined the company's credibility, raising the question: are those running this company liars or just inept?
Would you want a company run by either?
Sounds like something I might say… Oh wait, I did!
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Posted
Oct 08 2007, 11:38 AM
by
Matt Koppenheffer
Rating:
In the ongoing fessing-up process on Wall Street, Bank of America and JPMorgan are expected to join the parade of firms disclosing write-downs on mortgage and leveraged loans. At an estimated $2 billion-plus for JPMorgan and $1 billion for Bank of America, the losses are certainly not insignificant. However, for a $230 billion company like Bank of America the losses are relatively small, particularly when we look at some of the other firms that have been reporting.
I am still stuck on the losses reported at Merrill Lynch. Well in excess of $5 billion, these losses are quite significant for a $64 billion company. As I mentioned previously, the market seemed to digest these huge losses in part because it had been preparing itself for them for a while now.
Could losses like these really come out of the blue for Merrill? Well, the market didn't seem to doubt they were on the way -- Merrill's stock price dropped 19% between the firm's second quarter earnings release and early August despite the fact that Merrill beat analysts' second quarter earnings estimates. So how was Merrill itself out of the loop here?
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Posted
Oct 05 2007, 01:56 PM
by
Matt Koppenheffer
Rating:
Even with many of the largest banks and investment banks reporting disappointing earnings and major portfolio write-downs, the flop that Merrill Lynch is expecting for its third quarter is impressive.
In a press release today, the company revealed that it would take a $4.5 billion (that's net of hedges) write-down on CDOs and subprime mortgages, and nearly another $1 billion on financing provided for non-investment grade lending -- including loans for LBO deals. The losses will push Merrill into the red for the quarter to the tune of $0.50 per share.
So many may find themselves scratching their heads as they see Merrill's shares up over 2% today. In fact, the firm's shares are up over 7% since the close last Friday. The news about Merrill's losses is certainly no secret -- there are plenty of other articles out today screaming the write-downs in the headlines.
Then is the press release some odd flavor of good news? Well, not exactly. The reason why we're not seeing catastrophic movements on the part of Merrill, Citigroup, Deutsche Banks and others that have revealed major write-downs is that the markets have been preparing themselves for this for months now.
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