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BANKS: After the Fall Replies |
rffrydr
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 Posted: Wed Jan 12, 2011 2:28 pm Post subject: |
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When you're a utility bank serving the "regulators" can be quite rewarding--especially in the "colonies":
http://www.businessweek.com/magazine/content/11_03/b4211046076242.htm
| Quote: | | The first bank the team approached was Citigroup (C), which had played a similar role in Iraq. The financial conglomerate was a natural choice, given that it processes the U.S. government's payments abroad and has shown an appetite for working in emerging markets. Still, the work was neither fast nor easy. Citigroup conducted six months of due diligence in Afghanistan, including a weeklong road show with executives at the country's handful of domestic banks. The company made a deal with Afghanistan International Bank, and now the two are helping process payments made by NATO forces to local contractors. "By paying invoices in local currency, it ensures the money stays in the country to stimulate the economy," says Kevin Fitzgerald, the head of Citigroup's public-sector unit in North America, who oversees the company's contracts with the U.S. government. "The entire amount is deposited directly in a bank without being diverted or delayed by a local government agency." |
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rffrydr
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| Posted: Mon Jan 10, 2011 11:25 am Post subject: |
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Listening to the Bloomie today as they're covering the economic forum in Denver. An astonishing (to me) factoid out of Harvard: cost of our institutions of capital allocation is fully half of all capital returned therefrom.
No wonder you can't buy the SP without buying banks. Apart from the social injustice this implies it also tells me there's alot more to come from our financials over the next year. 
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rffrydr
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rffrydr
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| Posted: Tue Dec 28, 2010 9:23 am Post subject: |
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This eulogy/conspiracy to Reform that could have been is really just a manifestation of what is possible--and impossible in a modern financial system. Reforms imagined here would have to have been paid for. And who could pay that price?
And the idea at the end that shareholders were preserved at all costs shows just how little the author understands this issue. Truth always a casualty. Equity took it all. Indeed the crisis showed just the opposite: how, when push comes to shove, how little shareholders count for anything.
http://www.bloomberg.com/news/2010-12-28/out-of-lehman-s-ashes-wall-street-gets-what-it-wants-as-government-obliges.html
| Quote: | Reed, the former Citigroup executive, said he didn’t understand why lawmakers gave so much credit to arguments made by financial-industry participants whose job it is to put the interests of their shareholders above any concern for the safety of the financial system.
“I’m surprised that the people in Washington think that the stockholders are the people that they should protect,” Reed said. “It would seem to me that the people who should be protected are the overall banking system and the many, many, many companies that depend on it.” |
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rffrydr
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rffrydr
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rffrydr
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Location: Sunny California
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rffrydr
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| Posted: Thu Nov 11, 2010 6:00 pm Post subject: |
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Meredith the celebrity models foreclosure-gate as "Tobacco II" expecting litigation to go on for a decade--probably right. Crazy Paulson Plan looking better and better.
http://www.cnbc.com/id/40135878
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rffrydr
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| Posted: Thu Nov 11, 2010 7:31 am Post subject: |
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US banks
Published: November 10 2010 10:04 | Last updated: November 10 2010 12:05
| Quote: | Those who called for US bank nationalisation during the crisis are now ridiculed. A rebound in share prices and the repayment of government bail-out money supposedly vindicate the alternative approach of muddling through. But there were subtle as well as hard arguments for state ownership of the sickest institutions. Dud loans may yet show more banks to be insolvent. And muddling through is already having contradictory and undesirable consequences.
At the heart of the matter was the Obama administration’s insistence that saved banks do their bit to boost the domestic economy. Conscious of this, bank results are now littered with feel-good stories of helping small businesses and families. But the truth is that domestic bank lending has contracted every quarter since the end of 2008 according to Federal Reserve data, in spite of the latest loan officer survey showing a slight easing of lending standards for the last three quarters. They would tick that box, wouldn’t they? |
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rffrydr
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| Posted: Thu Nov 04, 2010 1:36 pm Post subject: |
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Judging from the AG's reference to Wells foreclosure practices serving as a template it's clear that securitization putbacks are not on State's minds. Perhaps that's why SP pegged costs at $31B across industry. Far cry from the $74B put to BAC two weeks ago (by certain hedge-fund pals behind their quote). The JPM Magnetar case is another story. But GS already put a priceo that. Interesting if they follow through with Citi--govt's own property!
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rffrydr
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| Posted: Wed Oct 20, 2010 11:46 pm Post subject: |
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Goldman or BofA?
Published: October 19 2010 15:15 | Last updated: October 19 2010 23:38
| Quote: | Graduates and jealous bankers would work for Goldman Sachs ahead of Bank of America any day of the week – squids and regulatory fines be damned. But for investors forced to choose, which bank should they give their hard-earned money to? With third-quarter results released by both on Tuesday, it is a good time to compare and contrast.
Each is a powerhouse in its own way but they are made of very different stuff: Goldman the high-octane investment bank xxx broker xxx hedge fund; BofA the classic universal bank with half of revenues from providing mere mortals their basic financial needs. Yet their shares have fallen by the same amount in the year to date and both banks have lost a fifth of their market value in the past 12 months. Which will outperform from here?
Ironically, it is BofA’s stodgier businesses that will benefit most if conditions improve. Tuesday’s results included provisions for credit losses (mostly in consumer credit cards and property portfolios) that fell by $2.7bn, not far shy of the bank’s total net income, excluding one-offs. Analysts at Morgan Stanley reckon BofA’s operating earnings will double by 2013, with declining provisions accounting for all of the growth net of tax.
Goldman, meanwhile, probably faces tougher challenges over the next few years. Its fixed income, currencies and commodities business, for example, which spewed out half of group revenues a year ago, is suffering as clients sit on their hands and margins compress. Its principal investments unit, still generating $750m in the quarter, faces regulatory pressure.
Yet, unlike BofA, which is in hock to an economy out of its control, Goldman’s eye-popping wage bill may prove its saviour. Net earnings last quarter would have been just $200m had compensation and benefits not dropped $1.5bn. Both stocks are cheap. If you are bullish on global growth, go for BofA, although rising tensions over dud mortgage portfolios are a real risk. Double-dippers should pick Goldman. |
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rffrydr
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| Posted: Tue Oct 19, 2010 3:08 pm Post subject: |
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Without judgment, this is what happens when the government becomes a "shareholder." Interests get confused:
http://www.bloomberg.com/news/2010-10-19/pimco-new-york-fed-said-to-seek-bank-of-america-repurchase-of-mortgages.html
Hard to believe this is coming out of the NY Fed...but day after the castration of The Man with A Tan, and the decline on the portfolios (interesting there's been no down pressure on TCW's Total Return fund--on the contrary), and the election around the corner....strange bedfellows indeed. 
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rffrydr
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| Posted: Thu Oct 14, 2010 10:37 pm Post subject: |
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JPMorgan
Published: October 13 2010 15:14 | Last updated: October 13 2010 20:13
| Quote: | First out of the financial results season traps: JPMorgan. The glamour boy of Wall Street. The bank that did not make a net income loss during the crisis. If this is what rivals want to become, what do Wednesday’s quarterly numbers say about the state of the industry?
EDITOR’S CHOICE
Wells adds to crisis over home seizures - Oct-14Video: US foreclosure crisis - Nov-03Spotlight falls on Wells foreclosure procedures - Oct-14Problems feared if foreclosures halted in US - Oct-13JPMorgan net income jumps 23% - Oct-13JPMorgan fails to ease investors’ anxiety - Oct-13For a start they are a reminder that banks are companies you want to work for, but not own shares in. To be sure JPMorgan had a solid quarter, eking out $4.4bn of net income in spite of elevated charge off rates and lower fees in retail and cards, tighter spreads in commercial and investment banking, not to mention a messy regulatory backdrop. Profit was boosted by loan loss reserves falling by $1.5bn as conditions improved, but that could easily reverse if the economy again takes a turn for the worse.
For all that, JPMorgan made a return on equity of just 10 per cent. Microsoft’s ROE, by comparison, is four times higher. Paying JPMorgan’s employees, meanwhile, chewed up 28 per cent of revenues. That is down from 53 per cent at the height of the credit boom in 2006, but the ratio is still not low enough to boost returns for shareholders.
Why is that? The reason is that ROEs are being eroded from every which way. Sexy boom-time products have disappeared. Leverage is down and risk is also being taken off the table. So-called “value at risk” for JPMorgan’s trading business, for example, has almost halved since a year ago. Nor is it obvious how returns can be boosted by plain old revenue growth. That explains the industry’s obsession with emerging markets. But while banks such as JPMorgan eye opportunities abroad, shareholders can more efficiently buy locally themselves.
Hence, to attract investors, pay must fall lower still. Expect pay cuts or lay-offs ahead. |
Revenues can fall 5% a year and earnings triple on reserves take-downs. But yield and little EEM will be the attraction going forward. And pay cuts. 
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rffrydr
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| Posted: Thu Oct 14, 2010 2:20 pm Post subject: |
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rffrydr
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| Posted: Thu Oct 14, 2010 9:10 am Post subject: |
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Last bull standing, raise their hand.
Pass on the Bank Stocks ... for Now
By Jim Cramer
| Quote: | | Bank stocks have entered the BP world again, where doomsday scenarios abound. We couldn't value BP at the height of the oil leak crisis, and we don't know how to value the banks now. The disaster thesis is that no one will have to pay their mortgage because they have read the headlines, and it does seem pretty silly to pay if they can't evict and claim your house. So you can't put a multiple on these companies and can't even regard book value as meaning anything. It's suddenly as if your mortgage is kind of like credit card debt. You can get away with not paying it for a while, so why bother paying? But is this BP at $50 or at $40 or at $30? Obviously the sellers here are betting it is the former. |
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