Sloppy start turned rally, but the banks didn’t participate, finishing up 0.06%, only catching a slight bid late in the session. Service names and Insurance led the sector, both closing up 0.54%. Attributing factors to banks weakness; rumbling of exposure to commercial real estate and impact of being stuck holding a depressed property in a down market, Barclays ugly lawsuit over its purchase of Lehman, Citi’s chairman Parsons says customers are sitting on their wallets as the economy has stalled, and Lazard’s vice chairman says banks are putting off acquisitions because they need to rebuild equity and prepare for tougher int’l capital requirements (since the crisis, financial firms have raised $900 bln, but need another $500 bln)
Leaders:
ABK+12.5%,OB+10.97%,PNX+9.04%,CBZ+7.01%,DRL+6.67%,FBC+5.70%,MCGC+5.17%.OFG+5.06%,TCB+4.58%,GLAG+4.51%
Laggards:
UCBI-6.07%,MCBC-7.57%,MELI-3.53%,EWBC-2.80%,FIG-2.31%,OZM-2.2%
Big Banks
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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
Gaps in regulation leave banks free to take risks
o
Regulatory reform will not prevent U.S. banks from making the kind of high-risk deals that drove the economy into the severest recession since the 1930s, according to The New York Times. Banks are still free to take high-risk bets on behalf of clients, based on a mistaken belief that losses would not find their way onto the company's balance sheet, the newspaper notes. Between April and July, Goldman Sachs and JPMorgan Chase each posted a loss of more than $100 million on trades made for customers.
The New York Times (free registration) (25 Aug.)
·
Fed/Banks
: Fed in Emergency Bid to Put Bailout Ruling on Hold
o
The Federal Reserve asked a U.S. appeals court to delay implementing a ruling that would force the central bank to disclose details of its emergency lending programs to banks during the financial crisis
o
http://www.cnbc.com/id/38860972
·
U.K. Banks Improved Performance Is ‘Uncertain,’ S&P Says
·
Despite Reform, Banks Have Room for Risky Deals
from DealBook
o
Despite regulation, some federally insured banks say that they will continue to make speculative bets using their own money on behalf of clients.
·
Bank Of China
1st-Half Net Interest Income CNY91.86 Bln
o
Analysts Expected Bank Of China 1st-Half Net Profit CNY52.81 Bln
·
Industrial & Commercial Bank of China
…ICBC 1st-Half Net Profit Up 27% On Wider Interest Margins
·
Swiss commodities group Glencore
International AG Thursday reported a 42% rise in first half net income before exceptional items due to higher commodities prices and said it has made progress with its planned $1 billion in disposals.
·
Warsaw Stock Exchange
will list its shares on Nov. 9, the daily Rzeczpospolita reports
o
Capitol Federal Financial announces stockholder and member approvals of plan of conversion and reorganization and intention to extend offering
($27.83)
CFFN announced that its stockholders and the members of Capitol Federal Savings Bank MHC (depositors and certain borrowers of Capitol Federal Savings Bank) have each approved the plan of conversion and reorganization pursuant to which Capitol Federal Savings Bank MHC will convert to the stock holding company form of organization and the contribution to the charitable foundation
Morgan Stanley downgrades NDAQ, SCHW
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Nasdaq OMX Group (NDAQ) downgraded to equal-weight from overweight; target cut to $22 from $25
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Charles Schwab (SCHW) downgraded to equal-weight from overweight; target cut to $15 from $18
CBOE
Holdings initiated neutral at Bank of America Merrill Lynch
- Target is $26
Lazard (LAZ) Cramer highlights as a way to play the pickup in M&A. He notes that M&A represents nearly 30% of revenue, significantly more than at any other investment bank out there. Cramer thinks that the stock could be worth around $49 a share.
COF upgraded to Outperform by Credit Agricole
WAL – RBC lowers px tgt to $7
Cantor/FBP: One Condition Satisfied (Preferred Stock Exchange Offer), One Remaining
- According to preliminary results announced by First BanCorp, its Exchange Offer of common stock for its non-TARP preferred stock was successful, with 88% of liquidation preference tendering, versus the 70% success threshold. Therefore, one of the two conditions to the U.S. Treasury's exchanging its $400 million of TARP preferred stock for common stock at a big discount (about 65%) was satisfied.
- If no more preferred shareholders tender, First Bancorp will be issuing about 225 million new FBP shares, thereby pricing the Exchange Offer at a discount of about 82%. With the Exchange Offer being a necessary condition for First BanCorp's re-capitalization (and survival), preferred shareholders apparently were persuaded that (the prospect of) something was better than nothing.
- The remaining condition is a $500 million common stock offering. In our view, survival is now highly probable if the common stock offering is completed, so we would expect the common stock offering to be successful.
Our HOLD rating and $0.50 target price are based on a peer P/E multiple (13x) times our 2011 EPS estimate of $0.04. See "Valuation" below
Disclaimer: Prepared by staff of Cantor Fitzgerald & Co. ("Cantor") and is for information purposes only. It is not intended to form the basis of any investment decision, should not be considered a recommendation by Cantor or any other person and does not constitute an offer or solicitation with respect to the purchase or sale of any investment nor is it a confirmation of terms. Any calculations and valuations presented herein are intended as a basis for discussion. Sources of information are believed to be reliable but Cantor makes no representation and gives no warranty that the information contained herein is accurate or complete. Any opinions or estimates given may change. Cantor undertakes no obligation to provide recipients with any additional information or any update to or correction of the information contained herein. This material is intended solely for institutional investors and investors who Cantor reasonably believes are institutional investors. Cantor, its officers, employees, affiliates and partners shall not be liable to any person in any way whatsoever for any losses, costs or claims howsoever arising from any inaccuracies or omissions in the information contained herein or any reliance on that information. Cantor may have positions in financial instruments mentioned, may have acquired such positions at prices no longer available, and may have interests different or adverse to your interests. No liability is accepted by Cantor for any loss that may arise from any use of the information contained herein or derived here from. This product may not be reproduced or redistributed outside the recipient's organization. Sources: Cantor Fitzgerald & Co., Reuters, Bloomberg, CNBC, Dow Jones, Marketwatch, Trade-Alert, and the Wall Street Journal. ***All eco data from Bloomberg and DJ
