Financials
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News and Views
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Macro/Technicals
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Active Names
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Earnings
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Sector News, M&A, Capital Raises
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Research Away
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Cantor Research
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Top Events/Earnings Calendar
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News and Views
Trader Commentary Banks looking alive this morning as HSBC and BNP Paribas report strong earnings. Regional banks faltered Friday as we wait for the next catalyst, perhaps a large acquisition. Insurers heating up, traders will be eyeing the group this week as UBS upgraded the group, MET followed up good numbers Friday with the acquisition of AIG’s unit with help from a 75 mln share secondary. FBR is positive on PRU ahead of numbers this week. PFG, PL, CNO, UNM, HIG among other big insurers to report this week. Visa and Mastercard under additional pressure from US mobile carriers threatening to displace cards with smartphones.
Macro/Technicals
XLF : -0.01; -0.07KIE : -0.20; -0.52
KRE : -0.11; -0.46
C : -0.04; -0.97
BAC : +0.02; +0.14
JPM : +0.07; +0.17
GS : -1.77; -1.16
WFC : +0.05; +0.18
Leaders: +18.83%,SBCF+12.4%,HAFC+9.3%,MET+4.63%,BXS+4.45%,cobz+4.13%,PCBC+4.12%,wtny+3.84%,ccbg+3.60%,STC+2.67%
Laggards: GNW-14%, FIG -5.12%, DEAR -4.65%, AINV -3.99%, CIA -3.47%, NITE -3.36%, IBIC -3.29%, DLX -3.20%, UBSI -3.19%,PMI-3.10
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
L Loews reports Q2 EPS $0.87 ($37.15)
The figure includes $1M in net investment gains. Reuters consensus is $0.75 -- 2 estimates. Book value per share increased to $43.53 at June 30, 2010, compared to $41.80 at 31-Mar. L repurchased 1.5M shares for $56M during Q2. At 30-Jun, there were 418.3M shares of Loews common stock outstanding.
AB AllianceBernstein reports Q2 EPS $0.38 ex-items; GAAP EPS of $0.31 ($26.68)
- Reuters is $0.44; unclear if comparable to GAAP or adjusted EPS.
- Company reports adjusted net revenues of $650.0M and GAAP net revenues of $688M.
- Reuters consensus is $718.6M; unclear if comparable to GAAP or adjusted net revenues.
Sector News, M&A, Capital Raises
MET MetLife announces 75M share secondary offering through BofA Merrill, Credit Suisse, Deutsche, HSBC, UBS and Wells Fargo ($42.06)
Recall MET announced in its ALICO guidance release that it expected to issue 75M shares at the 30-Jul closing price of $42.06.
Barron's sees a buying opportunity in Bank of America
The article cites relative valuation, as BAC trades at a 7x PE on 2012 expectations and 1.1x projected 30-Sep tangible book value of $13. One of the reasons for BAC's relative underperformance is investor concerns regarding the company's unwillingness to work around new regulations regarding consumer fees.
HFWA Heritage Financial acquires banking operations of Cowlitz Bank ($14.85)
Heritage Financial announced it has acquired the banking operations of Cowlitz Bank, Longview, Washington in an FDIC assisted transaction. The FDIC and Heritage Bank entered into a modified whole bank loss-share transaction to acquire approximately $280M of Cowlitz Bank's assets and approximately $350M in deposits. Heritage Bank purchased only performing loans in the approximate amount of $152M. The acquired loans (other than consumer loans) are subject to 80% loss coverage by the FDIC. The accepted bid included a 1% deposit premium and a negative bid of $8.8M on net assets acquired.
HOME Home Federal Bancorp announces purchase and assumption of LibertyBank ($13.05)
Home Federal announced that it has acquired the banking operations of LibertyBank of Eugene, Oregon, in a transaction facilitated by the FDIC. The acquisition includes approximately $387M of assets and $689M in deposits. Home Federal acquired the assets at a discount of $29.9M and the deposit liabilities at a deposit premium of 1.0%. The purchased loans, excluding consumer and deposit secured loans, and real estate owned are covered by a loss share agreement with the FDIC, under which the FDIC has agreed to cover 80% of the losses on the disposition of the loans and real estate owned.
PMACA PMA Capital says MMCap Asset Management agrees to vote shares in favor of purchase by Old Republic (ORI) ($6.71)
Under the agreement, dated 27-Jul, MMCap, which owns 5.01%, agreed to vote its shares in favor of the merger that was announced on 10-Jun.
CBC Capital Bancorp completes divestiture of interest in Community Bank of Lincoln to local investor group ($1.37)
At March 31, 2010, Community Bank of Lincoln had total assets of approximately $59.4M and total equity of approximately $5.1M.
TNCC Tennessee Commerce Bancorp files amended S-1; to offer up to 12.5M shares through Macquarie Capital ($5.65)
The new information is the share size. Recall that TNCC announced a $60M secondary offering on 28-Jul.
PMI PMI Group sells investment in FGIC Corporation ($3.13)
The PMI Group announced the sale of its equity ownership in FGIC Corporation. The financial terms of the sale were not disclosed. The company had impaired its investment in FGIC in Q1 of 2008 and, consequently, did not recognize any losses from FGIC in 2009 or 2010. While the proceeds from the sale of FGIC were not significant, PMI could potentially realize certain tax benefits in future periods from the disposition of FGIC.
HOMB Centennial Bank buys operations of Coastal Community Bank through loss-sharing agreements with FDIC ($24.03)
The acquisition is expected to bring 13 offices, $444M in assets, $330M in loans (before loan discounts and FDIC receivables), $21M of investment securities, and $415M in deposits. The FDIC is providing 80% loss-share protection on $347M in covered assets. The impact on HOMB is expected to be moderately accretive to net income and EPS, and initially neutral to book value per share and slightly dilutive to tangible book value per share but accretive to both going forward. The bank will use a portion of its recent $107.3M stock offering, and will continue to remain "well capitalized" by regulatory standards, needing no additional capital to support the transaction.
Regulators Close Five Banks; U.S. Bank Failures In 2010 Reach 108
o UK Treasury warns banks that higher lending and capital are preferable to higher bonuses and dividends - Guardian
o Banks Push European Shares Higher
§ BNP up 4%... reported Monday morning..a bunch of other EU banks report this week as well
§ BNP The beat was across all divisions
§ France’s biggest listed bank trumps profit expectations thanks to lower loan provisions and strong retail banking, offsetting volatile financial market conditions that hit investment banking
§ HSBC up 5% today…reported better…“The big positive from today’s results is the loan provision figures, which have dropped very significantly.”
o Stress tests help boost Europe bank funds from Financial Times
§ International investors have rushed back in to fund the activities of Europe’s banks following the publication 10 days ago of the regulator’s stress tests
o Banks Balance Sheets murky…..look at recent loan sales..per WSJ
§ Loan Sales by Banks Shed Light on Their Balance Sheets
§ But a closer look at banks' second-quarter asset sales suggests some reserves and write-downs may not be adequate.
§ Exhibit one is Winston-Salem-based BB&T $1.43 billion of foreclosed property. It is equivalent to 33% of BB&T's nonperforming assets.
o Goldman Details Its Valuations with AIG – WSJ link
§ Two years after collateral demands from Goldman helped spark a cash crunch at AIG, a mystery remains: How did Goldman come up with the mortgage-securities prices it used to extract cash from AIG?
o SEC Gets a FOIA Foil from WSJ.com
§ A provision in the new financial-regulation law that limits public access to documents collected by the Securities and Exchange Commission is stoking a debate over the proper level of disclosure.
o Banks Already Working Around FinReg Rules from The Washington Independent
§ Daniel Indiviglio explains that banks including Goldman Sachs are just reclassifying “proprietary traders” — ones who trade the company’s own money — as “asset managers.”
o The New Credit-Card Tricks WSJ link
§ Just months after historic legislation banned certain billing practices, card issuers have dreamed up new ones designed to trip up consumers.
o Parsing the Citi Settlement
§ To Bolster Lawsuits, Stockholders, Bondholders Ask: Was Fraud Involved?
§ Was it fraud or wasn't it?
§ When regulators filed civil charges against Citigroup Inc. on Thursday for the failure to disclose $40 billon in toxic mortgage assets in mid-2007, the word "fraud" was nowhere to be found in the announcement or formal complaint.
§ Instead, the Securities and Exchange Commission said it was accusing the New York bank of "misleading investors."
o Brazil's Aspirational Banks – WSJ link
o What will Ace's Greenberg do with $6 billion? from MarketWatch.com
§ Ace, one of the world’s largest commercial insurers, has billions of dollars in extra capital and analysts are wondering what Chief Executive Evan Greenberg is going to do with the stash.
o RBS Plans Asset Sales from WSJ.com
§ Royal Bank of Scotland Group is likely to announce two asset sales worth up to a total of $6.71 billion as early as Tuesday, as it continues efforts to shrink its balance sheet.
o Santander Pursues Local Listings from WSJ.com
§ Santander appears to be moving forward on a strategy of giving more autonomy to local units by listing subsidiaries in its main markets, boosting their independence from headquarters in Spain.
o Visa Negotiates to Settle Justice Probe from American Banker
§ Visa is in talks with the Department of Justice to resolve its concerns over payment network rules barring merchants from imposing surcharges on credit card purchases, and related
o UBS signs Broadgate deal from Telegraph
§ UBS, the Swiss bank, will remain at Broadgate keeping 5,000 jobs in the City after agreeing a new deal with British Land and Blackstone.
o Russian Bank Earnings May Top 2007 Record, Troika Dialog Says
§ Russian banks’ earnings may surpass the pre-crisis record this year as lending increases, Troika Dialog said. “Banks earned almost $3 billion in pre-provision revenues in June and over $8 billion in net income in the first half, putting them on target to possibly top 2007’s record earnings in ruble terms,” or 508 billion rubles ($16.82 billion), Troika said in an e-mailed note today.
o Banks on Europe’s Edge Face $122 Billion Bill
§ Banks in Europe’s most indebted nations need to refinance $122 billion of bonds this year, likely paying high interest costs even after receiving a clean bill of health from regulators.
o IBN ICICI Bank reports Q1 net income $221.0M vs year-ago $189.0M
o HUN Huntsman acquires chemicals business of Laffans Petrochemicals Ltd.
o Streetwise discusses economic indicators in the context of July’s market performance of +7%
o NEM, ABX, NSC, IFF, TAL, SSW Speaking of Dividends looks at Newmont Mining, Barrick Gold, Norfolk Southern, International Flavors & Fragrances, TAL Industries and Seaspan.
o PRE, ACGL, RE, ENH, WRB, AFG, BRK.A, CB, HIG, TRV D.C. Current discusses how offshore insurers are concerned about a bill drafted by Rep. Richard Neal of Massachusetts that would close a tax loophole. The bill could be negative for Partner Re, Arch Capital Group, Everest Re Group, and Endurance and positive for W.R. Berkley, American Financial Group, Berkshire Hathaway, Chubb, Hartford Financial Services Group and Travelers.
o FNGN Fund of Information talks about high valuations in small caps; positive on Financial Engines.
o Economic Beat says better real GDP must be higher for the recovery to be over and expansion to begin.
o Barron's discusses sizable ownership of US Treasury debt by emerging market powers such as China, Brazil, India and Russia
Research Away
SBX SeaBright Holdings upgraded to outperform from market perform at FBR Capital ($8.19)
Target of $10.50 is maintained.
Cantor Research
- Flagstar reported a 2Q:10 net loss to common of ($0.63), versus consensus of ($0.48). In our view, credit quality and core earnings both improved, though it is too soon to tell if the improvements are sustainable.
- Flagstar's credit quality metrics are weak: nonperforming assets (NPAs) are a very high 16.4% of loans; net chargeoffs were up 90% linked-quarter; loan loss provisioning was up 35%; and asset resolution expenses nearly tripled. Nonetheless, we regard Flagstar's credit quality as stabilized to improved: total delinquent loans were down 14%; NPAs were down 7%; and the increase in credit costs were partly due to management's desire to accelerate resolution of credit quality problems. See "Credit Quality" below.
- Core pre-tax, pre-credit cost earnings were up 56% linked-quarter. Non-recurring contributors were proceeds from late-1Q:10 capital-raising and the early-2Q:10 conversion of trust preferred stock to common stock. In addition, Flagstar's earning assets were down about 13% (due to securities sales and loan runoff, that were used to pay down high-cost funding). The lower earning assets should hurt go-forward earnings, while the better funding mix should help.
- Our HOLD rating and $3.75 target price (down from $4.00) are based on a peer P/E multiple (12x) times our 2011 EPS estimate of $0.30 (down from $0.33 due to lower earning assets). See "Valuation" below.
For the full pdf report, click the below link.
https://cantor.bluematrix.com/docs/pdf/1a8543b4-2b2d-4a15-91a6-860bba9a293f.pdf
Top Events/Earnings Calendar
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