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Citigroup Cuts 17,000 Jobs AP 4-11 Under pressure from investors to contain burgeoning costs, Citigroup announced that it will eliminate about 17,000 jobs, shift 9,500 positions to "lower cost locations" and consolidate some corporate operations. The steps -- which are expected to shave more than $2 billion from the bank's operating costs this year alone -- also should result in faster service for consumers and businesses, Citi's chief operating officer, Robert Druskin, said. The 17,000 job cuts amount to about 5 percent of the bank's 327,000-strong work force. The elimination of the jobs won't reduce the bank's work force, but merely slow its growth, Citi executives said. Druskin told a conference call with Wall Street analysts they should expect Citi's headcount to grow this year because of acquisitions and plans to open new branches, especially overseas. "But that rate of growth will be at a significantly diminished rate," Druskin said. Goldman Sachs analysts William F. Tanona and Daniel Harris predicted "a tepid reaction" by investors they said had expected deeper cuts. The bank said that including previously announced information technology savings, the overhaul will save the New York-based bank about $2.1 billion in 2007, $3.7 billion in 2008 and $4.6 billion in 2009. Citigroup said it will record a pretax charge of $1.38 billion in Q1-07, and additional charges totaling approximately $200 million pretax over the subsequent quarters of 2007. "More than 9,500 jobs will be moved to lower-cost locations, both domestically and internationally, with about two-thirds through attrition," the announcement said. BAC Q1-07 EPS $1.16 vs. $1.07 in Q1-06 PRNewswire 4-19 Bank of America reported net income rose 5% in Q1-07 to $5.26 billion from $4.99 billion a year earlier. Diluted EPS increased 8% to $1.16 from $1.07. ROE was 16.16% compared to 15.44% in Q1-06. ROA was 1.40% compared to 1.43% in Q-06. Book value per share was $29.74 at the end of Q1-07 compard to $28.19 at the end of Q1-06. Net interest income on a fully taxable-equivalent basis was $8.60 billion compared with $9.04 billion the previous year. The decline is a result of higher cost deposits, divestitures of businesses and the impact of hedging activities. The net interest yield decreased 37 basis points to 2.61%. Noninterest income rose to %9.825 billion from $8.901 billion in Q1-06. Credit metrics: average FICO for residential Mortgage Portfolio - 739 LTV 58% average FICO for residential Home Equity Portfolio - 722 LTV 64% average FICO for U.S. Credit Card Customers Portfolio - 686 managed loss ratio 4.81%. Conference Call BAC competes for deposits with goal of still having rates that are at or below median. The primary tool for that competition is using CDs and money market mutual funds as loss leader to gain non-interest bearing demand deposits. During Q1-07 NIM fell due to the impact of now having a higher percentage of mortgage loans. During Q1 BAC sold its Argentena loan portfolio and it also securitized more credit card loans and this had the benefit of lowering loan reserves. Whie card credit losses were lower in Q1, they are projected to trending higher - to 5.5% charge offs in 2008. The main drivers for this higher percentage of charge-offs is BAC's focus on having customers with higher balances, instead of attaining and keeping customers with higher credit volumes. Nancy Bush asked BAC to speak to their change in strategy on deposit raising on CDs. BAC: Across the deposit platform there has been stabilization in interest bearing vs. non-interest bearing accounts. Our growth in CDs and money markets was the result of our strategy from other product offerings. They were used as a reward a customers that used other services. these promotional programs drove deposit growth. Nancy asked BAC to clarify their comment of moderation of economy and projected 2% growth. BAC: We are a little more cautious than average because we believe that US profits moderating - low business investment. GDP growth of 2% Mike Mayo with Deutche Bank noted that over the last 2 quarter revenues were down and expenses were up. BAC: If you look across the business' - fee income - expense base managed. The strength is there but masked by flat curve. Mike asked if there was a point where BAC would pull back on investents [expansions]? BAC: No. One third is 'have to do' improvements anyway. Citi Q1-07 EPS $1.01 vs. $1.12 in Q1-06 PRNewswire 4-16 Citigroup reported net income for Q1-07 of $5.01 billion, or $1.01 per share. Results include a previously disclosed charge of $1.38 billion, or $871 million after-tax, related to a structural expense review conducted during the quarter. Excluding the charge, net income was $5.88 billion, or $1.18 per share. Analysts surveyed by Thomson Financial had projected earnings of $1.09 in the quarter, excluding charges, on revenue of $24.2 billion. Return on common equity was 17.1%. From the Citi Conference Call [Goal 1] To drive U.S. consumer revenue growth and consumer loans, deposits, and assets under management were all up. Citi opened 51 new branches, but still expenses were under control. [Goal 2] To re-weight business so U.S. consumer business is not so heavily weighted for Citi. And for Q1, 30% of revenues came from this source vs. 33% revenues from US consumers in Q3-06. This weighting was changed due to acquisitions - Citi has a focus on international acquisitions. Citi also announced the acquisition of Egg [the world's largest internet bank] and Nikko Cordial of Japan during Q1-07. [Goal 3] Effective expense management - not a one time effort [the cuts previously announced] expense growth 17% - 10% up without the one timers. Citi's 'plan' is working even with the headwinds of a tough yield curve. [Goal 4] Manage through the rate cycle. Part of doing this was Citi's increase in Q1 for loan loss reserves. In sum, we feel good out our progress. During Q1, Citi had revenue growth and increases in customer volumes. Our traders did very well this quarter. While credit costs were up 77% - EPS only declined 9%. As to cost of credit going forward - we are going from extremely low loss levels in prior years towards a more normal environment. Citi stated that their current expectation is for no more share buy-backs in 2007. From the QnA session, Don McDonald with Banc of America requested more color on the causes of margin decline in Q1 when there were rising short term rates and also an impact from increased revenues from trading - what would cause margin stabilization? Citi: Our trading business is not rum to generate NIMs [net interest margins]. About half of Q1's fall in margins was due to trading. But the mortgage business also caused margin compression. So given a static yield curve and shift in business toward more mortgages - then it was logical that Citi's yield margins would compress. David Hilder with Beare Sterns asked about Citi's acquisition of Old Lane - he noted that they were successful when they were owned by Morgan Stanley, but their experience as being hedge fund managers was brief. Citi: Old Lane was more of an investment more than an acquisition. We were getting 120 great people. And Old Lane would easily plug in to Citi's existing alternative investments group. Wachovia Q1-07 EPS $1.20 vs. $1.09 in Q1-06 PRNewswire 4-16 Wachovia reported net income of $2.30 billion [$1.20/share] in Q1-07 compared with $1.73 billion [$1.09/share] in Q1-06. After-tax net merger-related expenses did not affect earnings per share in Q1-07 and amounted to 3 cents per share in Q1-06. ROE was 13.47% in Q1-07 compared to 13.09% in Q3-06, 14.85% in Q3-06 and 14.62% in Q1-06. ROA was 1.34% in Q1-07 compared to 1.31% in Q4-06 and 1.34% in Q3-06. Book value per common share $36.47 in Q1-07 compared to $36.61 in Q4-06 and $32.37 in Q3-06. Net interest income was $4,497 billion in Q1-07 compared to $4.612 billion in Q4-06 and $3.539 billion in Q1-06. Net interest margin in Q1-07 was 3.01% compared to 3.09% in Q4-06 and 3.21% in Q1-06. Fee and other income was $3.741 billion in Q-07 compared to $3.980 billlion in Q4-06 and $3.517 billion in Q1-06. Fee and other income as a percent of total revenue was 45.41% in Q1-07 compared to 46.32% in Q4-06 and 49.84% in Q1-06. From the Wachovia Conference Call Mortgages originations were down in Q1, and customer preference was for less profitable offerings - with a preference for fixed rate loans instead of ARMs. For Golden West loan portfolio, there were higher non-performing loans. There is a 74% loan to value on average for these loans, so there is a good cushion. Historically, few non-performing loans end with foreclosure. In the sub-prime market, or for loans to customers with FICO scores of 620 and below with low collateral, WB had only $1.3 billion. But WB includes debt/income ratios and past history with these customers into the loan decisions and that aids them in having an increased comfort level with these loans. For Alt-A loans - our past experience has been good - we currently hold $3.4 billion of these. WB's guidance for 2007 [1] less interest income growth which should be flat to 2% growth. [2] Less in expenses. [3] Tax rate lower. [4] Higher fee income. Bottom line: close to previous EPS guidance. Gary Townsend noted that WB's total student loan portfolio was down 6% in income and the portfolio down 20%. WB: It is seasonal business - peaks in Q3. We sold some loans in Q4. Gary also asked about commercial loans. WB: There were isolated and small charge-offs. There was no industry or geographic pattern to those charge-offs. WB noted that they are going from a strong environment for those loans towards a normal environment. Nancy Bush asked about the legislative atmosphere for regulatory changes in exotic loans? WB: We do not fear it. It should not affect us due to out conservative standards at Golden West. Any changes could benefit us vs. our competition. As an example - many of WB's competitors using teaser rates [a practice that might be curtailed legally] and WB has not. Nancy noted that WB's sequential decline in expenses was dramatic - and WB replied that you will see a continued focus by WB on that issue. Mathew O'Connor of UBS asked about the spreads on fixed vs. option ARMs. WB: Spread on variable rate loans has ranged from 230-260 basis points. For fixed rate loans, the range was for a 7.10% yield with funding costs of 5.25% - so we lose 50 basis points of margin on fixed rate loans. Matthew noted that the growth in foreign commercial loans looked strong. WB replied that growth in the International business was due to increases in US import/export trade - we have been in business a long time - a business with almost no losses. Matthew noted that the middle market loan growth looked strong. WB said that they expect to see continued growth there - capturing new customers. David Hilder with Beare Stearns asks about 'rate modification' [WB was cutting rates on some re-financings] - how much are you changing rates by on annual basis? WB: It is case by case, looking at the borrower’s history. New loans plus modifications will cause 100 basis point compression. John McDonald with Banc of America asked about WB's excess capital - how much will it build and effect on buy backs? WB replied that they are at our target - growth for consumer loans will be decent - we will not increase our securities portfolio - so excess capital will be generated. John asked about future M&A activity. WB replied that their focus is not on M&A - but on organic growth and integration of recent acquisitions. Mike Mayo with Deutche Bank noted that WB's retail broker business was doing quite well - why? WB noted that the retail investor's appetite has been strong. There was been record investment sales from the general bank. And as WB expands in Texas and California, the number of potential retail investors has grown. WB noted that a lot of retail investor’s new investments were yield driven. Mike asked how much of WB's expected fall in net interest income was due to mortgages. WB noted that the general consumer loans outside mortgages were good. So most [if not all] of declining outlook is due to mortgages. Ed Magarian with Merrill Lynch noted that loan margins and volumes at Golden West down and wanted to know when WB expected it to stabilize. WB: As it moves into spring and summer - there is some seasonality. We have built additional channels for more mortgages. And there has been expand training of employees who sell loans. So we expect reversal of the present down-trend over the summer. Due to yield curve there will continue to be some margin compression. WB noted that they had only started to put Golden West mortgage originators in Wachovia branches - and that should help mortgage growth. Also, checking accounts were introduced in Golden West in January - bringing in money from existing Golden West customers. Ed asked if the new checking accounts were mainly NOW accounts. WB: It is a mix - and while there is a heavy interest bearing slant to these deposits, there were demand accounts in this mix too. Ed noted that non-interest bearing deposits were down $2 billion in Q1. WB: That was heavy influenced by our commercial accounts - commercial account balances build at year end and then fall. WB's consumer DDA balances were up 3% - so the fall in non-interest deposits was totally due to commercial accounts. BK Q1-07 EPS $0.57 vs. $0.55 in Q1-06 Businesswire 4-18 The Bank of New York Company reported today first quarter net income of $434 million and diluted earnings per share of 57 cents. On an adjusted basis, excluding merger and integration costs, Q1-07 net income was $449 million and diluted earnings per share was 59 cents. This compares to net income of $422 million, or 55 cents of diluted earnings per share, and income from continuing operations of $360 million, or 47 cents of diluted earnings per share, in Q1-06. ROE in Q1-07 was 15.70% compard to 14.95% in Q4-06 and 14.75% in Q1-06. ROA in Q1-07 was 1.73% compared to 1.66% in Q4-06 and 1.50% in Q1-06. Book value per common share at the end of Q1-07 was $15.20 compared to $15.34 at the end of Q4-06 and $13.09 at the end of Q1-06. Net interest income in Q1-07 was $427 million compared to $451 in Q4-06 and $339 million in Q1-06. Net interest margin in Q1-07 was 2.18% compared to 2.27% in Q4-06 and 1.95% in Q1-06. Total noninterest income in Q1-07 was $1.475 billion compared to $1.441 billion in Q4-06 and $1.265 billion in Q1-06. Nonperforming assets were $29 million at 3-31-07, up from $25 million at 3-31-06 and down from $38 million at 3-31-06. Nonperformance assets ratio in Q1-07 was 0.1% - the same ratio as in Q4-06 and Q1-06. KEY Q1-07 Net Income $0.87 vs. $0.70 in Q1-06 PRNewswire 4-17 KeyCorp announced Q1-07 income from continuing operations of $358 million [$0.89/share] compared to $274 million [$0.66/share] for Q1-06 and $311 million [$0.76/share] for Q4-06. Net income totaled $350 million [$0.87/share] for Q1-07, compared $289 million [$0.70/share] for Q1-06 and $146 million [$0.36/share] for Q4-06. ROA in Q1-07 was 1.54% compared to 0.61% in Q4-06 and 1.26% in Q1-06. ROE in Q1-07 was 18.63% compared to 7.34% in Q4-06 and 15.48% in Q1-06. Book value at the end of Q1-07 was $19.57 compared to $19.30 at the end of Q4-06 and $18.85 at the end of Q1-06. Taxable-equivalent net interest income was $700 million for the first quarter of 2007, compared to $722 million for the year-ago quarter. Key's net interest margin for Q1-07 declined to 3.50% from 3.72% for Q1-06. The reductions in net interest income and the net interest margin were due to tighter interest rate spreads on deposits caused by a continuation of the inverted yield curve, and a continued shift in deposit mix from transaction accounts and money market deposit accounts to higher-cost certificates of deposit. Key's noninterest income was $506 million for Q1-07, compared to $481 million for Q1-06. At 3-31-07, Key's nonperforming loans totaled $254 million and represented 0.39% of period-end portfolio loans, compared to 0.33% at 12-31-06, and 0.44% at 3-31-06. At March 31, 2007, nonperforming assets totaled $353 million and represented 0.54% of portfolio loans, other real estate owned and other nonperforming assets, compared to 0.41% at 12-31-06, and 0.48% at 3-31-06. JPM Q1-07 EPS $1.34 vs. $0.86 in Q1-06 Businesswire 4-17 JPMorgan Chase reported Q1-07 net income of $4.8 billion, or $1.34 per share, compared with net income of $3.1 billion, or $0.86 per share, for the first quarter of 2006. Income from continuing operations was $4.8 billion [$1.34/share] in Q1-07 compared with $3.0 billion [$0.85/share] for Q1-06. ROE in Q1-07 was 17% compared to 16% in Q4-06 and 12% in Q1-06. ROA in Q1-07 was 1.41% compared to 1.32% in Q4-06 and 1.00% in Q1-06. Book Value at the end of Q1-07 was 34.45 compared to $33.45 at the end of Q4-06 and $31.19 at the end of Q1-06. Net revenue of $4.1 billion was up by $343 million, or 9%, from the prior year. Net interest income of $2.6 billion was up 2% due to The Bank of New York transaction, higher home equity loans and deposit balances in Regional Banking, and wider loan spreads in Auto Finance. These benefits were offset partially by lower prime and subprime mortgage balances, the sale of the insurance business, lower auto loan and lease balances, and narrower spreads on deposits. The interest rate spread in Q1-07 was 2.10% compared to 1.86% in Q4-06, 1.82% in Q3-06, 1.73% in Q2-06 and 1.88% in Q1-07. Noninterest revenue of $1.5 billion was up by $288 million, or 24%. JPM declared a quarterly dividend of $0.38/share, an increase of $0.04 per share, or 12%. The dividend is payable on July 31, 2007, to stockholders of record at the close of business on July 6, 2007. MEL Q1-07 EPS $0.58 vs. $0.47 in Q1-06 Businesswire 4-17 Mellon Financial Corporation reported income from continuing operations of $243 million [$0.58/share] in Q1-07 compared to $193 million [$0.47/share] in Q1-06, and $298 million [$0.72/share] in Q4-06. Results for Q1-07 included $8 million in merger- related expenses in connection with the proposed merger with The Bank of New York, and a $12 million litigation reserve charge, together totaling approximately 3 cents per share. Results for Q1-06 included $19 million in charges associated with amounts payable to Mellon's former CEO, approximately 3 cents per share. Net income totaled $252 million [$0.60/share] in Q1-07 compared to $207 million [$0.50/share] in Q1-06, and $237 million [$0.57/share] in Q4-06. ROE in Q1-07 was 20.8% compared to 25.3% in Q4-06 and 18.8% in Q1-06. Book value per common share at the end of Q1-07 was $11.76 compard to $11.26 at the end of Q4-06 and $10.15 at the end of Q1-06. Net interest revenue in Q1-07 was 125 million compared to $109 million in Q4-06 and $119 million in Q1-06. Yield on total interest-earning assets in Q1-07 was 5.59% compared to 4.97% in Q1-06 and 5.39% in Q4-06. Cost of funds in Q1-07 was 3.81% compared to 3.05% in Q1-06 and 3.84% in Q4-06. Net interest margin in Q1-07 was 1.78% compared to 1.92% in Q1-06 and 1.55% in Q4-06. Noninterest revenue in Q1-07 was $1.280 billion compared to $1.413 billion in Q4-06 and $1.120 billion in Q1-06. Noninterest revenue as a percentage of total revenue was 91% in Q1-06 compared to 93% in Q4-06 and 90% in Q1-06. PNC Q1-07 Net Income $1.46 vs. $1.19 in Q1-06 PRNewswire 4-18 The PNC Financial Services Group reported net income of $459 million [$1.46/share] for Q1-07 compared $354 million [$1.19/share] in Q1-06 and $376 million [$1.27/share] in Q4-06. PNC earned adjusted net income of $434 million [$1.38/share] for the quarter. Adjusted net income for Q1-07 excludes a $33 million net after-tax gain on shares related to the BlackRock Long Term Incentive Plan and $8 million of after-tax integration costs. Adjusted net income was $357 million [$1.20/share] for Q1-06 and $391 million [$1.32/share] for Q4-06. ROE in Q1-07 was 15.59% conmpared to 16.67% in Q1-06. ROA in Q1-07 was 1.73% compared to 1.56% in Q1-06. Book value per common share at the end of Q1-06 was $42.63 compared to $36.80 at the end of Q4-06 and $29.70 at the end of Q1-06. Retail Banking earned $201 million for Q1-07, compared with $190 million for Q1-06 and $184 million for Q4-06. Corporate & Institutional Banking earned $132 million in Q1-07, compared with $102 million in Q1-06 and $126 million in Q4-06. PFPC [which does accounting/administration services] earned $31 million forQ1-07, compared with $27 million in Q1-06 and $31 million in Q4-06. Taxable-equivalent net interest income totaled $629 million for Q1-07, an increase of $66 million compared with $563 million for Q1-06 and an increase of $58 million compared with $571 million for Q4-06. The net interest margin in Q1-07 was 2.95%, compared with 2.95% in Q1-06 and 2.88% in Q4-06. Noninterest income totaled $1.1 billion for Q1-07, compared with $1.2 billion for Q1-06, and $969 million in Q4-06. Nonperforming assets to total assets was .17% in Q1-07 compared to .17% in Q4-06 and .22% in Q1-06. STI Q1-07 Net Income $1.44 vs. $1.46 in Q1-06 PRNewswire 4-17 SunTrust Banks reported net income for Q1-07 of $513.9 million [$1.44/share] compared to $531.5 million [$1.46/share] in Q1-06. ROA in Q1-07 was 1.16% compared to 1.10% in Q4-06, 1.18% in Q3-06, 1.21% in Q2-06 and 1.21% in Q1-06. ROE in Q1-07 was 12.10% compared to 11.20% in Q4-06, 12.10% in Q3-06, 12.61% in Q2-06 and 12.64% in Q1-06. Total book value per common share increased from $48.78 as of 12-31-06 to $49.00 as of 3-31-07. Fully taxable-equivalent net interest income was $1,188.3 million in Q1-07, down 1% from Q1-06. The lack of growth was mainly the result of the effects from the flat to inverted yield curve. Net interest margin increased 8 basis points from the fourth quarter of 2006 to 3.02%. Total noninterest income was $878.9 million for Q1-07, up 3% from Q1-06. Nonperforming loans were $665.1 million, or 0.57% of total loans as of 3-31-07 compared to $289.7 million, or 0.25% of total loans as of 3-31-06 and $531.8 million, or 0.44% of total loans as of 12-31-06. The increase in nonperforming loans from 3-31-06 and 12-31-06 was mainly due to an increase in residential mortgage nonperforming loans. Wells Fargo Q1-07 EPS $0.66 vs. $0.60 in Q1-06 Businesswire 4-17 Wells Fargo reported record diluted earnings per common share of $0.66 for first quarter 2007, up 10 percent from $0.60 in first quarter 2006. Net income was a record $2.24 billion, up 11 percent from $2.02 billion in Q1-06. ROA was 1.89% in Q1-07, 1.79% in Q4-06 and 1.72% in Q1-06. ROE was 19.65% in Q1-07, 18.99% in Q4-06 and 19.89% in Q1-06. Book value per common share was $13.77 at the end of Q1-07, $13.58 at the end of Q3-06 and $12.50 at the end of Q1-06. Net interest income increased 3% from Q1-06 to $5.010 billion - driven by a one percent increase in average earnings assets and a 10 basis point increase in the net interest margin. The completion of the sales of ARMs and lower-yielding investment securities last year reduced the earning asset growth rate year over year, but also helped boost net interest margin. Net interest margin continued to benefit from growth in core deposits. On a linked-quarter basis, net interest income was down $40 million, or 3 percent (annualized), largely due to two fewer days in the quarter, and a decline in the mortgage loan warehouse. On a linked-quarter basis, net interest margin increased two basis points to 4.95% - 10 basis points higher than Q1-06. Noninterest income increased $746 million [20%] from Q1-06 to $4.431 billion. Growth in fee income was strong across the board, reflecting our ongoing success in cross-selling products and services to both consumer and commercial relationships. Ratings Changes On 4-13 Stifel Nicolaus Initiated coverage of BAC at Hold, Initiated WB at Hold and Initiated WFC at Buy. On 4-12 Deutsche Securities Initiated coverage of BAC at Hold , Initiated BK at Buy, Initiated C at Buy, Initiated JPM at Hold, Initiated KEY at Sell, Initiated MEL at Buy, Initiated PNC at Sell, Initiated STI at Hold, Initiated TCB at Sell, Initiated WB at Hold and Initiated WFC at Hold. Home Page Factoids Previous Update |