Financials
| Today's Financials Stories | |
|
News and Views
|
Macro/Technicals
|
Active Names
|
Earnings
|
Sector News, M&A, Capital Raises
|
Cantor Research
|
Top Events/Earnings Calendar
|
|
News and Views
Whipsaw day for financials as a late Goldman rally pulled the sector and the S&P back up through 1100. XLF again flirted with its 200 day $14.92. Life Insurers led an early spread of solid numbers and all traded well until a mid-morning sell-off after Cuomo announced and investigation on the group, namely MET and PRU but they recovered nicely early afternoon, finishing up 0.46%. Asset managers had a strong day behind BEN’s qtr. Visa reversed hard on the opening after their number didn’t excite the street and dragged it peers. European banks outperformed their US counterparts, banks finished off (0.13%) as smaller regionals have recently shown lackluster earnings.
Macro/Technicals
XLF : +0.05; +0.34KIE : +0.67; +1.77
KRE : -0.10; -0.42
C : +0.02; +0.49
BAC : +0.04; +0.29
JPM : -0.14; -0.35
GS : +5.32; +3.61
WFC : -0.39; -1.39
Leaders: VCBI +23.05%, AMP +12.285, STC +10.57%, MCBC +10.0%, AEA +6%, HAFC +5.74 JACK +5.51% ,PNX +4.72% ,MCO +4.42%, HMN +4.29
Laggards: PMI -14.78%, CPF-6.78%, STSA -6.74%, PCBC -6.73%, WSH -5.44%, MGI -4.66%, WSH -5.44%, MGI -4.66%, V-4.26% ,WAL-3.5
Active Names
Big Banks - BAC, C, WFC, JPM, GS, MS, FITB, STT, USB, HBAN, HCBK, PBCT, FHN, RF, BBT
Mid/SmallcapBanks/S&L- FBP, WAL, EWBC, GSBC, HMPR, IBKC, PRWT, RBPAA, WBCO,NYB,DCOM,SBIB,CVBF,GAIN,LKFN,TFSL,IBCP,BRKL
Brokers KCG, SCHW, AMTD, ETFCD
Asset Managers/Inv co’s- BX, FIG, GLG, GROW, JNS, LAZ, MF, LM,KFN
Insurance- GNW, HIG, MET, ALL, TRV
CreditCards- AXP, COF, MA, V, DFS
Specialty Finance/Mort Insurers- ACAS, ABK, MBI, MTG, RDN
Earnings
MET MetLife reports Q2 EPS $1.23 ex-items vs Reuters $1.00 ($40.21)- total assets $14.5B vs. $13.6B seq. premiums, fees & other revs. $8.68B vs. $8.8B seq. and up 4% y/y annuity sales $4.8B vs. $4.4B seq. Earnings conference call reminder: 7/30/2010 at 08:00 ET. 612.326.1011
PRAA Portfolio Recovery Associates reports Q2 EPS $1.14 vs Reuters $0.92 ($67.04)- Company reports revenues of $93.0M vs Reuters $84.9M. Earnings conference call reminder: 7/29/2010 at 17:30 ET. 888.680.0879 pw:10874783
ACAP American Physicians Capital reports Q2 EPS $0.98 vs Reuters $0.80 ($41.11)
GNW Genworth Financial reports Q2 operating EPS $0.31 vs Reuters $0.28 ($15.80)- Total AUM at the end of the quarter were $46.43B vs year ago $42.98B. Earnings conference call reminder: 7/30/2010 at 09:00 ET. 877.548.7906
AACC Asset Acceptance reports Q2 EPS $0.03 vs Reuters $0.02 ($4.38)- Company reports revenues of $50.9M vs Reuters $51.6M.
PMACA PMA Capital reports Q2 cont ops EPS $0.07, unclear if comparable to Reuters $0.13 ($6.72)- Combined ratio 101.7% vs 99.4% y/y
MIGP Mercer Insurance Group reports Q2 EPS $0.59 vs Reuters $0.53
PFBC Preferred Bank reports Q2 EPS ($0.20) vs Reuters ($0.12) ($2.19)- Earnings conference call reminder: 7/29/2010 at 17:00 ET. 877.941.9205
MCBC Macatawa Bank reports Q2 EPS $0.10 ($1.53)- Net interest income totaled $12.8M vs. $13.4M y/y
ERIE Erie Indemnity reports Q2 EPS $0.86 vs year-ago $0.57 ($48.68)- P&C net premiums earned were $53M vs year ago $52M, and the segmetn's combined ratio was 101.8% vs year ago 96.6%.
TIBB TIB Financial reports Q2 EPS ($0.99) ($0.39)- TIBB notes that at this time, all the applications required to be filed with regulatory agencies have been filed, it has reached an agreement on the significant terms on the repurchase of the Preferred Stock issued to the U.S. Treasury under the TARP Capital Purchase Program and the comapny is working diligently to satisfy the other conditions required for the closing of the transaction Shares of TIBB remain halted.
CSE CapitalSource reports Q2 EPS ($0.02), unclear if comparable to Reuters ($0.08) ($5.26)- Earnings conference call reminder: 7/30/2010 at 08:30 ET. 866.843.0890 pw:8969179
- Total commercial lending assets were $7.8B at the end of the quarter compared to $8.3B at the end of the prior quarter.
- Loans on non-accrual were $1.13B at the end of the quarter, a decrease of $14M from the end of the prior quarter.
- Loans 30-89 days delinquent were $110M at the end of the quarter, a decrease from $261M at the end of the prior quarter.
- Loans 90 or more days delinquent were $459M at the end of the quarter, an increase from $437M at the end of the prior quarter.
- Net charge-offs were $133M, an increase from $119M in the prior quarter.
- Provision for loan losses was $25M for the quarter, a decrease from $219M in the prior quarter.
- Allowance for loan losses was $579M at the end of the quarter, a decrease from $686M at the end of the prior quarter.
AON Aon Corp reports Q2 EPS $0.81 ex-items vs Reuters $0.75 ($36.63)
SUR CNA Surety reports Q2 EPS $0.64 vs Reuters $0.49 -- 1 estimate ($16.79)- Earnings conference call reminder: 7/30/2010 at 11:00 ET. 800.946.0783
OB OneBeacon Insurance reports Q2 Operating EPS $0.19 vs Reuters $0.29 ($15.91)
MGI MoneyGram reports Q2 EPS ($0.31) ($2.66)- Earnings conference call reminder: 7/30/2010 at 09:00 ET. 888.504.7953 pw:9747824
Sector News, M&A, Capital Raises
HGIC Harleysville Group comments on impact from Q2 catastrophes ($31.92)- Company reports estimated catastrophe losses incurred during Q2 will reduce operating income by $0.19 per share after taxes, and will impact the company's statutory combined ratio by 3.8 points for the quarter. Harleysville Group expects to report operating income of $0.61 per share and a statutory combined ratio of 101.3% in Q2 of 2010 when the company announces its Q2 results on August 6. Reuters consensus is $0.78, though it is unclear if the figures would be comparable.
o IMF warns on US banks… IMF Says U.S. Financial System May Need $76 Billion in Capital
§ Home prices, commercial real estate loans and economic growth have the potential to cause shocks that could expose banks to more losses.
o Banks May Get Profit Boost as Demand for Debt Rises
§ US banks are taking advantage of improving earnings and growing investor demand to raise billions of dollars in debt at historically low interest rates, a move that could boost the sector’s profits in coming years.
§ The burst of fundraising in the US is in stark contrast to Europe where banks have struggled to issue debt as the eurozone crisis and worries about the financial industry have undermined market confidence
§ http://www.cnbc.com/id/38477046
o IASB proposes accounting overhaul for insurers
§ Insurers face a radical shake-up in how they account for their business as the international accounting rule maker on Friday proposes new rules which investors say could reduce the insurance industry’s cost of capital and boost stock prices.
§ The International Accounting Standards Board has proposed, for the first time, a single accounting system for insurers, making their accounts comparable across more than 120 countries around the world.
§ http://www.ft.com/cms/s/0/62e3213e-9b33-11df-baaf-00144feab49a.html
o RVSB Riverview Bancorp 10.0M-share secondary priced at $1.80/share through Wunderlich Securities and Howe Barnes Hoefer & Arnett
o Citi Pays for Subprime Feint – WSJ link
§ Citigroup will pay $75 million to settle regulatory charges that it failed to disclose $40 billion in subprime exposure to investors in the second and third quarters of 2007.
o Nomura reported…higher end of expectations
§ “The results are unimpressive, with weaker investment banking revenue and lower trading gains,” said Keefe, Bruyette & Woods (per BBG)
o Nomura Said to Hire 40 Elite Recruits at Triple Pay - BBG
§ Nomura Holdings Inc., Japan’s biggest securities firm, offered jobs to 40 students at triple the normal starting salary under a new plan to strengthen its international business, two people involved in the hiring said.
o Macquarie Group (MQG.AU) fell 3% after issuing a profit warning
§ Macquarie Warns of Lower Profits in Major Units – WSJ link
· Goldman Sachs eyes Slovene top bank- Reuters
o US bank Goldman Sachs (GS.N) is interested in taking over Slovenia's largest bank Nova Ljubljanska Banka (NLB)
o It also said the government would approve a possible takeover of NLB by Belgian banking and insurance group KBC
o http://www.reuters.com/article/idUSLDE66T0CP20100730
Cantor Research
Cantor/KBW: Temporary Lull in Principal Transactions; No Change to Thesis: Reiterating BUY
- KBW reported 2Q:10 EPS of $0.22, versus consensus of $0.26. The reason for the "miss" was lower Principal Transactions revenue (down 83% sequentially), namely, fixed income trading (down 47%), equity market-making (small loss), and investments (loss, not on TRUP-backed CDOs). While 2Q:10 is a reminder that there is some risk in KBW's balance sheet, we note that, in a very difficult quarter worldwide, KBW still produced positive Principal Transactions revenue. We expect a bounce-back in 3Q:10, and more so in 4Q:10 and 2011.
- While KBW's capital markets revenue was down 13% from a record 1Q:10, it was still strong, and, we believe, implies that a high level of capital-raising activity will continue for at least three years. According to management, the capital markets pipeline is "very full" currently.
- Banks/thrifts should need to raise capital to: (a) refinance about $43 billion of TARP preferred stock, (b) fill capital adequacy "holes," and (c) position for/finance M&A transactions (both FDIC-assisted and unassisted). KBW was involved in deals in 2Q:10 that fit this profile, and we expect a similar average quarterly volume of deals (but not as high quarterly KBW capital markets revenue) for the next three years. We anticipate higher regulatory requirements for common equity, which should contribute to capital-raising (see page 3).
We expect an M&A boom in 2011, with capital-raising and M&A driving EPS to $1.95. Our target price of $30 (down from $35) is based on the average 2011 P/E of most relevant peers/M&A boutiques (15x, down from 18x at the time of our previous report). See "Valuation" below
For the full pdf report, click the below link.
https://cantor.bluematrix.com/docs/pdf/e1f72848-8742-427a-a2e2-ef5dec2288ad.pdf
Cantor/CATY: Much Better Credit Quality, Shrinking Balance Sheet: HOLD
- Cathay General reported a 2Q:10 net loss to common of ($0.03) per share, versus consensus of ($0.22). The main reason for the "beat" was much-better-than-expected loan loss provisioning, as credit quality improved markedly.
- Almost all credit quality metrics improved: (a) 30-89 day delinquencies were down 39%; (b) inflows into nonperforming assets (NPAs) were down 45%; (c) NPAs were down 2%; (d) net chargeoffs were down 64%; and consequently (e) loan loss provisioning was down 46%. We expect further improvement, as the bulk of the larger, higher-risk loans appear to have been addressed.
- One workout technique that Cathay General has used extensively is troubled debt restructurings (TDRs), converting non-paying NPAs into paying, non-accrual TDRs; this makes sense to us.
- We regard the main negative in the quarter as a reduction in earning assets, to (a) pay off high-cost funding (thereby expanding the net interest margin) and (b) improve capital ratios. This makes sense to us, but, stand-alone, it also reduces earnings power. Cathay General intends to continue to pay down high-cost borrowings in 2H10/2011.
- The combination of Cathay General's shrinking balance sheet and its memoranda of understanding (MOUs) with bank regulators are the reasons for our HOLD rating. It would not surprise us if the MOUs are lifted after 4Q:10 earnings, but, until then, they add an element of regulatory unpredictability.
- Our $13 target price (down from $14) is based on a peer P/E multiple (15x, down from 16x due to the 2Q:10 bank stock selloff) times our 2011 EPS estimate of $0.81. See "Valuation" below.
For the full pdf report, click the below link.
https://cantor.bluematrix.com/docs/pdf/6d24ad60-cf9d-40d7-88cc-eb12d196b6c3.pdf
Top Events/Earnings Calendar
|
30 | ||||
|
Before |
| |
During |
| |
After |