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Biz Links Current Issue Q3-02 Index Q2-02 Index Q1-02 Index Q4-01 Index Q3-01 Index Q2-01 Index Q1-01 Index Prior Financial Services Updates Jan 2005 Dec 2004 Nov 2004 Oct 2004 Sept 2004 August 2004 July 2004 June 2004 May 2004 Feb 2004 Jan 2004 Dec 2003 Nov 2003 Oct 2003 |
NOTE: Please confirm through your own research any numbers on which you are to make a buy, sell or hold decision. The page is ment to be a supliment for those already getting monthly sector updates from their broker. It is the goal of this page to provide more timely data - and perhaps cover a wider array of stocks and different valuation metrics. Data entry errors sporadically happen. Monthly Sector Summary During March, [for the Money Center Banks in last month's update] the year-to-date sector price performance fell from a 2.84% loss to a 6.45% loss. 05 EPS growth estimates, which ended Feb with a fall of 1.77%, ended March with a fall of 1.15% - helped by a 7% rise in UBS and hurt by a 1% loss in JPM. Yields rose from 3.39% to 3.52% [a rise of 13 basis points - almost in line with the 10 year treasury]. During March, [for this new group of Large Cap Banks] the year-to-date sector price performance fell to a 7.30% loss. 05 EPS growth estimates ended March with a fall of to 2.39%. Yields rose from to 3.61%. The new stocks added were: BBT, FITB, KEY, NCC, NFB, PNC, RF, and STI. The old group had market caps mostly over $100 billion - and the new additions have market caps beggining at $20 biillion. The old group were more diversified financials - the best example being Citigroup. Still, despite the differences, the changes in key sector average figures [yields, P/E's and growth] were very minor. This change was done so that a larger group of banks can be followed - especially in the mid cap group. BBT, KEY, NCC, PNC, and RF were previously in that grouping. FITB [First Third], NFB [North Fork], and STI [Sun Trust] had not been previously followed. The ten year treasury ended the month at 4.50% [vs 4.36% on 2-28 - a rise on 14 basis points] after reaching a high of 4.62% on the 28th.
Most of the in-school branches are from credit unions and community banks that are looking to stay competitive by attracting more local customers. There are about 150 credit-union branches in high schools now, up from 100 in the fall of 2003, according to the Credit Union National Association. But some big banks are going back to school, too. This year, SunTrust Banks of Atlanta opened branches at an area high school and middle school, bringing its total number of "youth banks" to nine. Four of those banks are at elementary schools and the bank plans to open another one at a high school this fall. Wells Fargo has operated a branch at East High School in Anchorage, Alaska, since 2000 and is in discussions on opening a branch at a Denver high school. The move into schools marks financial institutions' recent push to build branch networks, which has accelerated over the past five years. Banks had previously closed offices in the belief that customers would do their banking at ATMs and online, which involve little infrastructure costs. Customers, however, were reluctant to give up the branch experience. "This is just one tactic financial institutions are using to generate more accounts," says Chris Gill, a senior consultant with Dove Consulting, a financial-services consulting firm. The branches are a sign that banks are recognizing children's spending power. Teenage Research Unlimited, a market-research firm, estimates that teens spent $169 billion in 2004, up 38% since 1997. According to a recent Teenage Research survey, about 62% of individuals ages 12 to 19 years old, have a savings account, but only 22% have a checking account and 17% have a debit card.
Last spring Bank of America opened two branches in California containing Starbucks coffee shops and Citizens Financial Group's Charter One opened five branches with Starbucks last year, bringing its total number to seven. North Fork Bancorp's North Fork Bank opened three branches with Starbucks in New York last year and plans to open four more in New York and New Jersey this year, bringing its total number of coffee-shop branches to eight. Starbucks Corp. estimates that it has at least 18 locations that are part of bank branches or adjacent to banks. Starbucks isn't the only coffee retailer getting into banking. Minneapolis chain Caribou Coffee Co. plans to begin testing the concept this year, and Denver coffee chain Teaberry Coffee has one branch in a local bank. MarkleBank of Markle, Ind., opened a branch in Fort Wayne in January with a coffee shop run by a local coffee business, Naked Clay Cafe. (It's called the Bean Counter$.) The coffee shops are one of the latest signs of banks' re-emphasis on branches. In the 1990s many financial institutions closed branches and imposed teller fees, believing the future of retail banking was in automated services such as the Internet and ATMs. But banks found that consumers like the convenience of in-person service, so many banks started to focus on expanding their branch networks. Now, with some markets seeing a bank branch on every street corner, banks are trying to figure out how to differentiate themselves. The idea of the coffee shops is to lure café patrons and market bank products and services while they sip their lattes. The hope is that some of the local-community feel -- and frequent visitors -- of coffee shops will rub off on the bank. According to CIBC World Markets, as many as 700 people walk into the average Starbucks daily. Meanwhile, the average bank customer visits a branch just 2.9 times a month, according to Synergistics Research Corp. In October 2003 nearly six in 10 respondents to a Synergistics Research survey reported it would be acceptable for a bank branch to share space with another type of business such as a coffee shop. Riggs Bank, a unit of Riggs National Corp., leased space in a Washington branch to Starbucks in September 2003. The bank claims that at the end of 2004, deposits at this particular branch were up 40% from the year before and loans were up more than 70%. Having a Starbucks in the branch is an attraction "because there is a loyalty and frequency of visits at Starbucks that we are able to take advantage of," spokesman Mark Hendrix says. For banks, linking their services with a name such as Starbucks also provides a way to collect extra revenue from unproductive space. In most cases, the arrangements are landlord-tenant partnerships where banks lease extra space in existing or new branches to the coffee shops. For coffee shops, leasing from a bank is often a way to get less-expensive, high-visible real estate. Banks have tried other types of partnerships to boost traffic. In 1996 and 1997, Wells Fargo opened branches with dry cleaners that were removed about a year later. "This initiative simply wasn't mutually beneficial to our partners," a Wells Fargo spokeswoman says. In contrast, branches with Starbucks that the bank opened in 1997 and 1998 remain operating today.
The action comes as Mr. Prince is grappling to contain the damage from a string of problems, from the loss of Citigroup's private-banking license in Japan to investigations into a bond-trading strategy in Europe that its traders called "Dr Evil." Yesterday, prosecutors in Milan dealt another blow, alleging that Citigroup and four other financial institutions may have violated securities laws in their dealings with failed dairy giant Parmalat SpA, according to people familiar with the matter. In a document summing up the conclusions of their yearlong investigation, Italian prosecutors said Parmalat was able to mislead investors with the help of institutions including the Italian unit of Citigroup; the London and Milan branches of New York investment bank Morgan Stanley; and the Italian and United Kingdom arms of Germany's Deutsche Bank AG, these people said. The Fed's order concerning new acquisitions was slipped into the middle of a 22-page order by its board of governors Wednesday, which approved Citigroup's previously announced acquisition of First American Bank of Texas. Citing recent "adverse compliance events" at Citigroup and its recently unveiled plan to address them, the Fed said it "expects that management at all levels will devote the necessary attention to implementing its plan fully and effectively and won't undertake significant expansion during the implementation period. The board believes it important that management's attention not be diverted from these efforts by the demand that mergers and acquisitions place on management resources." The order doesn't define what kinds of acquisitions would qualify as a "significant," nor put a timetable on the restriction. The Fed also didn't specify how it would regard potential foreign acquisitions, some of which wouldn't require Fed approval. A spokesman for the Fed declined to elaborate on the order. On March 1, Citigroup formally launched a global campaign to strengthen controls, improve training and overhaul its systems for reviewing and paying employees. "Implementing the five-point plan is our top priority and it is the right way for Citigroup to engage in sustained long-term growth," a Citigroup spokesman said, declining further comment on the Fed order. From time to time, the Fed has placed similar restrictions on other institutions, but rarely on such a large institution, in writing and in such a public form. "This is highly unusual given the Fed's habit of rubber-stamping applications," said Tom Schlesinger, executive director of the Financial Markets Center, a research institute that has previously accused the Fed of being too permissive with financial institutions. "In some respects, it's a public spanking of Citi by the regulators." It isn't clear how much the Fed's order will interfere with plans by Citigroup to expand through acquisitions. In the past year, Mr. Prince has emphasized to investors the need to grow "organically" by expanding existing operations.
Titans of their day, their impeccable bloodlines and easy society manners stood in direct contrast to the new breed of brooding, aloof Wall Street executives such as Mr. Purcell and E. Stanley O'Neal, the chief executive of Merrill Lynch and the first African-American to lead a Wall Street investment bank. Like Mr. Purcell, who merged his Dean Witter with Morgan Stanley in 1997, Mr. O'Neal is a Wall Street outsider. He experienced his own war with the entrenched elites at his firm when he declared an end to the notion of "Mother Merrill" as a clubby clique of brokers and bankers bent upon global expansion, regardless of the impact on the bottom line. The eight retired Morgan Stanley executives rose to prominence when the firm was at Wall Street's epicenter. Such was its arrogance that until 1979 the firm would insist on being the exclusive underwriter on bond and equity deals. Today, however, Morgan Stanley faces a drastically altered landscape, squeezed on both sides by large banks like Citigroup and nimbler, more downmarket institutions like Bear Stearns. As Morgan Stanley's stock price and allure have sagged, the group of eight has lashed out at Mr. Purcell, blaming him for the merger's failure with a degree of personal animus that seems contrary to their beloved class codes of discretion and public politesse. "It was a merger of patricians and plebeians, and the final irony was that the plebeians outwitted the patricians," said Ron Chernow, the author of "The House of Morgan," a book that chronicles the rise of Morgan Stanley. "There is a feeling that Purcell desecrated the Morgan Stanley name. It's emotional for them and it goes beyond money: they gave Phil a Cadillac and got a Chevy in return." Surprisingly, it was Richard Fisher, the much-revered former chief executive of Morgan Stanley, who approached Mr. Purcell about the merger. (Mr. Fisher died in January.) Morgan Stanley had advised Dean Witter on its public offering in 1993, and the firm became enamored with Mr. Purcell's ability to capture a share of the middle-American wallet, via his brokers and his Discover credit card. For decades, the very idea of selling stock to individuals was seen by Morgan Stanley elites as second-class work. But with the rise of the retail investor in the 1990's, they saw that the merger with Dean Witter would be the perfect way for the firm to distribute its high-class funds and public offerings to small investors. It was a radical notion, and one that even these men may now question as they see how Goldman Sachs, Morgan Stanley's archrival, has thrived by remaining true to its core trading and investment banking franchise. Goldman long ago spurned the idea of branching out into the types of retail businesses that have hobbled Morgan Stanley. In many ways, the essence of the divide between the Dean Witter and Morgan Stanley factions is captured by the contrasting personalities of Mr. Purcell, 61, and S. Parker Gilbert, 71, chairman of Morgan Stanley from 1984 to 1990 and one of the leading spokesmen for the eight executives. Born and raised in Salt Lake City, Mr. Purcell is a Notre Dame graduate who made his reputation by starting the Discover card from scratch while he was a senior executive at Sears in the mid-1980's. He has remained true to his Midwestern roots: even after Dean Witter went public in 1993 and grew to be a major Wall Street firm, he would commute to his home in Winnetka, a suburb of Chicago, most weekends. He has been mostly invisible in New York's cultural scene. All of this seems to infuriate the advisory directors, who live either in the city or in suburbs like Greenwich, Conn., so much so that they mentioned his commutes in a letter they wrote to the board. "If you run a big firm and you only are here a few nights a week, you miss things," Mr. Gilbert said. "The whole idea of these firms are relationships with other financial services firms and the New York corporate and social fabric." The Yale-educated Mr. Gilbert, who presided over Morgan Stanley's public offering in 1986, represents the perfect counterpoint to Mr. Purcell. His father was an influential senior partner at J. P. Morgan during its heyday in the early 1900's, and in some ways Mr. Gilbert's rise to the top during the 1960's and 70's seemed pre-ordained. He is a vice chairman of the Metropolitan Museum of Art, president of the J. Pierpont Morgan Library and in many ways a prototype of the discreet, well-connected banker who made the House of Morgan what it was. But in the evolving financial world, where the clincher to many deals has become the size of a bank's balance sheet as opposed to the depth of a personal relationship, Mr. Gilbert's banking style seems in some ways extinct. All the same, he has returned to the fray with a giddy delight, making an appearance on CNBC and reveling in the boys-club bonhomie that surrounds the eight men as they wage their campaign. "Its an extraordinary development," Mr. Chernow said. "The essence of the old Morgan Stanley represented secrecy and discretion. Now, in order to restore the old Morgan Stanley they have had to violate this secrecy and discretion." While many on Wall Street are sympathetic to their crusade, one question remains unanswered: assuming that they are successful in removing Mr. Purcell, who would replace him? The most logical candidate would have been Vikram Pandit, who was president of the institutional business (and a favorite of the group of eight) until he resigned this week. And while the recently appointed co-presidents, Stephen S. Crawford and Zoe Cruz, are well regarded inside and outside the firm, neither has run a major business unit or would be a likely candidate to assume control over the firm at this point. Sonw Morgan Stanley romantics have tossed out the name of John Mack, the former president, who was pushed out by Mr. Purcell in a power struggle in 2001. Such a result seems improbable, though: while still popular within the firm, Mr. Mack does not have strong ties to Morgan Stanley's board, which is dominated by directors who were appointed by Mr. Purcell or who hail from Dean Witter. In the end, Mr. Purcell's strongest card may be the absence of a viable No. 2. But even if he is deposed, that won't change the fact that Wall Street is increasingly made up of people like him. BB&T Calls Active on Sale Talk Cynthia Schreiber, Dow Jones Newswires 3-25-05 Call buyers snapped up options on BB&T amid speculation the Winston-Salem, N.C., bank holding company may consider selling itself. A BB&T spokesman said the company doesn't comment on rumors. Traders appear to expect BB&T shares to make a move. Implied volatility of BB&T as seen from one-month option prices rose to about 26, above the 52-week average, said Paul Foster, a strategist at financial-information Web site theflyonthewall.com. Regions Ranks Again Nationally as Small-Business Lender Businesswire 3-14-05 Upholding its tradition of banking America's entrepreneurs, Regions Financial has for the fourth year in a row been ranked one of the top small business-friendly financial services providers in the country by the U.S. Small Business Administration. Regions, one of the nation's Top 15 financial services providers, placed third in the category of small business lending by large banks and bank holding companies in the "SBA's Small and Micro Business Lending in the United States for Data Years 2002-2003" study. Small business lending is defined as business loans of less than $1 million. The study, released this month, ranks the 67 largest banks and bank holding companies (those with more than $10 billion in assets) from which small businesses were most successful in obtaining loans. March Ratings Changes On 3-2 CIBC Wrld Mkts Initiated BAC at Sector Outperform, Initiated C, USB, WB and WFC at Sector Perform and Initiated JPM at Sector UnderPerform. On 3-23 Prudential Upgraded NCC from Underweight to Neutral. On 3-15 Harris Nesbitt Initiated NCC at Underperform. On 3-15 CSFB Upgraded NCC from Underperform to Neutral. On 3-15 Harris Nesbitt Initiated USB at Outperform. On 3-11 Janney Mntgmy Scott Upgraded WB from Hold to Buy. Mid-Month Mid-Cap Bank Sector Summary During March, the year-to-date sector prices [for the original grouping of stocks] fell from a loss of 7.94% to a loss of 8.78%. Year-to-date 05 EPS growth estimates fell to -2.09 from Feb's loss of -2.11%. Yields went from 3.74% to 3.83% - a rise of 9 basis points. [HIB rose 24% on its buy-out - lowering the rise in sector yields - which would have gone to 3.86% or a rise of 12 basis points without this aberation.] The ten year treasury ended the month at 4.50% [vs 4.36% on 2-28 - a rise on 14 basis points] after reaching a high of 4.62% on the 28th. SUSQ replaced PBCS [both having a lower than sector average yield and a higher than sector average PE ratio, and slightly higher than sector average forecasted 2006 EPS growth] in the group this month. During March, the year-to-date sector prices [for the current grouping of stocks] fell to a loss of 7.85%. Year-to-date 05 EPS growth estimates fell to -2.99%. Yields ended at 3.58%. While BBT, KEY, NCC, PNC, and RF left the mid-cap grouping to the large cap grouping, CBSS, CNB, SNV, TCB, and WL were added to this group. CNV and SNV both had yields too low to qualify for the previous group - and both slightly raise sector average growth and P/Es. Capital One Buying Hibernia in $5.35B Deal AP 3-07-05 Under terms of the deal, Hibernia shareholders will receive $33 for each share, split into 45 percent cash and 55 percent stock. That equals $15.35 in cash, and an exchange of shares worth .2261 of each Capital One share. The deal values Hibernia shares at a 24 percent premium based on the stock's closing price Friday of $26.57 per share. Hibernia shares soared $5.67, or 21.3 percent, to close at $32.24 in Monday trading on the New York Stock Exchange, while Capital One shares fell $2.08, or 2.7 percent, to close at $76. Hibernia has more than $22 billion in assets, 293 branches and operations in Louisiana, Texas and Mississippi. It is the 36th largest U.S. bank by market capitalization, according to data provider SNL Financial. Sky Financial Lowers First Quarter 2005 Earnings Guidance PRNewswire 3-18-05 Sky Financial announced today that it expects earnings for the first quarter to be in the range of $.29 to $.30 per diluted share compared to its prior guidance of $.44 to $.45 per diluted share. In the first quarter, Sky expects to record a provision for credit losses of $29.0 to $31.0 million. The increased provision for credit losses is a result of higher than anticipated credit losses, primarily from two large commercial credits and the sale of a group of non-performing consumer loans. The commercial credit losses are attributable to a leasing company, which had a concentration of commercial leases to a service provider that declared bankruptcy, and from the closure of a cold storage food business, which lost its primary customer and the pending sale of the business did not occur as expected. The non-performing consumer loans are primarily second mortgages, which Sky expects to sell by the end of the first quarter. Including the expected sale of the non-performing consumer loans, Sky expects to report non-performing loans at the end of the first quarter 2005 of approximately $123.8 million compared to $143.7 million at the end of last quarter. The allowance for credit losses is projected to be approximately $149.6 million or 121% of non-performing loans at the end of the first quarter, compared to $151.4 million or 105% of non-performing loans at the end of last quarter. The Search for Yield Barrons 3-xx-05 These stocks each carry dividend yields of 3.5% or higher, have increased their dividends for at least 10 years in a row and have been awarded high grades from Standard and Poor's for consistency of earnings. S&P doesn't necessarily recommend the shares. [Shares of non-banks removed from list]
March Ratings Changes On 3-8 Merrill Lynch Initiated ASBC at Buy. On 3-15 Harris Nesbitt Initiated CAM at Neutral. On 3-15 Harris Nesbitt Initiated FNB at Underperform. On 3-18 Merrill Lynch Initiated FMER at Neutral. On 3-9 Moors & Cabot Upgraded HU from Sell to Hold. On 3-24 Morgan Stanley Upgrade KEY from Underweight to Equal-weight. On 3-23 Prudential Downgraded KEY from Neutral to Underweight. On 3-15 Harris Nesbitt Initiated KEY at Neutral. On 3-11 Ryan, Beck & Co Initiated KEY at Mkt Perform. On 3-18 Merrill Lynch Initiated ONB at Neutral. On 3-21 KeyBanc Capital Mkts / McDonald Downgraded SKYF from Buy to Hold. On 3-18 Merrill Lynch Initiated SKYF at Neutral. Home Page Factoids Previous Update | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||