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Mellon, Bank of New York Merger Completed Thomas Olson, Tribune-Review 7-02 Mellon completed its merger into The Bank of New York today, creating one of the world's largest investment management companies. It not only manages more than $1 trillion in stock, bond and other investments, but also provides custody and other services for more than $18 trillion in investments, making it the world's biggest investment custodian. The newly merged company trades under the symbol, "BK." WFC Reports Q2-07 EPS of $0.67 vs. $0.61 in Q2-06 Businesswire 7-17 Wells Fargo reported record diluted earnings per common share of $0.67 for Q2-07, up 10% from $0.61 in Q2-06. Net income was a record $2.28 billion, up 9% from $2.09 billion in Q2-06. Revenue of $9.89 billion was another record, up $1.1 billion, or 13%, from a year ago and up $450 million, or 19% (annualized), on a linked-quarter basis. ROE in Q2-07 was 19.55% compared to 19.76% in Q2-06. ROA in Q2-07 was 1.82% compared to 1.71% in Q2-06. Book value per common share at the end of Q2-07 was $14.07 compared to $12.46 at the end of Q2-06. Net interest income in Q2-07 was $5.196 billion compared to $4.984 billion in Q2-06. The net interest margin declined 6 basis points in the quarter, largely due to the accelerated asset growth, which also will increase net interest income, but likely reduce the net interest margin in future quarters. At 4.89% in Q2-07, our net interest margin remained the highest among our peers. Total noninterest income in Q2-07 was $4.695 billion compared to $3.805 billion in Q2-06. Total nonperforming assets were $2.72 billion (0.79% of loans) at June 30, 2007, compared with $2.67 billion (0.82%) at March 31, 2007, and $1.92 billion (0.64%) one year ago. KEY Reports Q2-07 EPS of $0.85 vs. $0.74 in Q2-06 PRNewswire 7-16 KeyCorp announced Q2-07 income from continuing operations of $337 million, or $0.85 per diluted common share compared to $303 million, or $0.74 per share, for Q2-06, and $358 million, or $0.89 per share, for Q1-07. ROA for Q2-07 was 1.45% compared to 1.58% in Q1-07 and 1.33% in Q2-06. ROE in Q2-07 was 17.66% compared to 19.06% in Q1-07 and 15.85% in Q2-07. Book value at the end of Q2-07 was $19.78 compared to $19.57 at the end of Q1-07 and $19.21at the end of Q2-06. Taxable-equivalent net interest income was $706 million for Q2-07, compared to $726 million for Q2-06. Average earning assets grew by $2.6 billion, or 3%, while the net interest margin for the current quarter declined to 3.46% from 3.68% for the second quarter of 2006. The reduction in the net interest margin was due primarily to tighter interest rate spreads on both loans and deposits, reflecting the continuation of competitive pricing, and a shift from NOW and money market deposit accounts to higher-cost certificates of deposit. Additionally, as part of the February 2007 sale of the McDonald Investments branch network, Key transferred approximately $1.3 billion of NOW and money market deposit accounts to the buyer. McDonald Investments' NOW and money market deposit accounts averaged $1.5 billion for the second quarter of 2006. Compared to the first quarter of 2007, taxable-equivalent net interest income grew by $6 million, and the net interest margin declined by 4 basis points. The improvement in net interest income was attributable to a $1.4 billion, or annualized 7%, increase in average earning assets. Total earning assets 81.587 billion earning 1.415 billion at an average rate of 6.95%. Total interest- bearing liabilities in Q2-07 were $65.898 billion costing $709 million at an average rate of 4.33%. Key's noninterest income was $649 million for the second quarter of 2007, compared to $545 million for the year-ago quarter. The strong growth reflected increases of $67 million in net gains from principal investing, $23 million in net gains from loan securitizations and sales, and higher revenue from several other fee-based businesses. In addition, results for the current quarter include a $40 million gain related to the sale of MasterCard Incorporated shares, compared to a $9 million gain recorded in the year-ago quarter that resulted from the share redemption by MasterCard Incorporated as part of its initial public offering. At June 30, 2007, Key's nonperforming loans totaled $276 million and represented 0.41% of period-end portfolio loans, compared to 0.39% at March 31, 2007, and 0.41% at June 30, 2006. At June 30, 2007, nonperforming assets totaled $378 million and represented 0.57% of portfolio loans, other real estate owned and other nonperforming assets, compared to 0.54% at March 31, 2007, and 0.46% at June 30, 2006. From the Conference Call: Mastercard gains - sold 60% of holdings in Q2 - still have more holdings. Private real estate developers - KEY's national commercial real estate focues at larger end of business - and that helped us during that part of the cycle. We restrict our branches from getting envolved with local developers. The loans are done with professional real estate people. KEY ramped down condo loans 18 months ago and residental 12 months ago. We do not project the real estate situation to improve until 2008. Commercial mortgage loans held for sale rose in Q2. Any mark to market mark-downs? Spreads have narrowed - smaller gains on loans held for sale. Vols are good and expect it to stay open. No material write downs. Service charges up - driven by consumer side - adding checking accounts. Activity charges up. Mike Mayo with Deutche Bank - what changed for you to raise your guidance? Number of things - better actifvity from fee income. Community banks deposit service charges - there were serveral years where they decreased and that is reversing. We are seasonal - and second half is strongest. M&A - KEY is now out of prior restraints - continue to look in the markets where we already are in but lack share of market. Asset quality trends on leasing has stabilized and moving in the right direction. Deposit trends - growth by region: growth in Western markets in commercial and consumer even in the face of higher home equity payoff were up. NE - business up but consumer loans down. Deposit offerings - we are very competitive. More rational pricing in West - and we are competitive there Key of Cleveland Ohio has 950 Full Service branches located in 23 geographic districts across 13 states - none of which is in the south-east. KEY was ask about their Atlanta and Florida real estate exposure. KEY: Commercial is a national business. We are in the south east markets. We began reduction two years ago. Managed condo exposure. SE is just part of our national approach. SE exposure is coming down and that trend will continue. We focus on the large guys - and they have staying power. With have good LTVs. We are conservative in our underwriting. JPM Reports Q2-07 Income of $1.20 vs. $0.99 in Q2-06 Businesswire 7-18 JPMorgan Chase reported Q2-07 net income of $4.2 billion compared with net income of $3.5 billion for Q2-06. Earnings per share of $1.20 were up 21% compared with $0.99 per share in Q2-06. ROE in Q2-07 was 14% compared to 17% in Q1-07 and 13% in Q2-06. ROA in Q2-07 was 1.19% compared to 1.41% in Q1-07 and 1.06% in Q2-06. Book Value at the end of Q2-07 was $35.08 compared to $31.89 at the end of Q2-06. BAC Reports Q2-07 EPS of $1.28 vs. $1.19 in Q2-06 PRNewswire 7-19 Bank of America reported Q2-07 net income rose 5% to $5.76 billion from $5.48 billion a year earlier. Diluted earnings per share increased 8% to $1.28 from $1.19. Revenue net of interest expense on a fully taxable-equivalent basis increased 8% to $19.96 billion from $18.52 billion in Q2-06. ROE was 17.55% compared to 17.26$ in Q2-06. ROA was 1.48% in Q2-07 compared to 1.51% in Q2-06. Book value per share at the end of Q2-07 was $29.95 compared to $28.17 at the end of Q2-06. Net interest income in Q2-07 was $8.386 billion compared to $8.630 billlion in Q2-06. Net interest yield [margin] in Q2-07 was 2.59% compared to 2.85% in Q2-06. Noninterest income rose 17% to $11.18 billion from $9.59 billion in the second quarter of 2006, driven by increases in equity investment gains, other income, investment banking and service charges. Nonperforming assets were $2.39 billion, or 0.32% of total loans, leases and foreclosed properties, at June 30. This compared with $2.06 billion, or 0.29%, at March 31 and $1.64 billion, or 0.25%, at June 30, 2006. From the Conferecne Call: BAC added to the legal liability reserves - why? Due to FAS 5 rule - something has to be probable. La Salle transaction looks to happen - to close early Q4. Charge-off went from 8 basis points to 12 basis points. The potential problems are not Broker originated [it tends to be toxic waste] or correpondent - but self origination [which implies the problem is smaller than average]. Return to normalcy in bankrupcies - will take us to 5% to 5.5% loss [in cards?] in 2008 for a full year average. There is only a 12 basis point loss on the home equity portfolio. The BAC Board meets later this month and will look at dividend. Payout ratio will be at the high end of the 40% to 50% range. BK Reports Q2-07 EPS of $0.59 vs. $0.52 in Q2-06 PRNewswire 7-19 The Bank of New York, which on July 1, 2007 merged with Mellon, reported second quarter income from continuing operations of $448 million and diluted earnings per share of 59 cents. The Q2-07 included merger and integration expenses ($47 million) that amounted to approximately four cents per share. Excluding this amount, EPS from continuing operations in Q2-07 was 63 cents per share, an increase of 21% compared with income from continuing operations of $391 million, or 52 cents per share, in Q2-06. Income from continuing operations was $437 million, or 57 cents per share, in Q1-07, and excluding merger and integration expenses ($15 million) was 59 cents per share. ROE in Q2-07 was 15.5% compared to 15.7% in Q1-07 and 15.9% in Q2-06. Book value per common share at the end of Q2-07 was $15.56 compared to $15.20 at the end of Q1-07 and $13.18 at the end of Q2-06. At BK: Total fee and other revenue amounted to $1.580 billion, an increase of $210 million, or 15%, and represented 78% of total revenue. Net interest revenue (FTE) totaled $454 million with a net interest margin of 2.01%. This compared to $365 million in Q2-06 and $429 million in Q1-07. At MEL: ROE was 22.4% in Q2-07 compared to 20.8% in Q1-07 and 21.4% in Q2-06. Fee and other revenue was $ 1.363 billion in Q2-07 compared to $ 1.280 billion in Q1-07 and $1.158 billion in Q2-06. Net interest revenue was $134 million in Q2-07 compared to $125 million in Q1-07 and $113 million in Q2-06. Net interest margin FTE was 1.79% in Q2-07 compared to 1.78% in Q1-07 and 1.70% in Q2-06. Citi Reports Q2-07 Income of $1.24 vs. $1.05 in Q2-06 Businesswire 7-20 Citigroup reported net income for Q2-07 of $6.23 billion, or $1.24 per share, both up 18% from Q2-06's of $5.27 billion, or $1.05/share. International revenues and net income were up 34% and 35%, respectively. Return on equity was 20.1%. The net interest margin declined 6 basis points versus the first quarter 2007, as the benefit from lower cost of funds was offset by growth in lower yielding trading assets.
Markets and Banking incomes were up due to [1] Fixed income markets revenues increased 24% to $3.42 billion, driven by improved results across all products, including interest rates and currencies, credit and securitized products, and commodities. [2] Equity markets revenues grew 67% to a record $1.58 billion on higher results in cash trading, derivatives, equity finance, and convertibles. Global Wealth Management income was up due to strong results at Smith Barney and Citi's private bank. Alternative Investments revenue and net income growth was primarily driven by higher revenues from proprietary activities, up 87%. Revenue growth reflected both realized and mark-to-market gains across private equity, hedge fund, and other portfolios. Client capital under management increased 55%. WB Reports Q2-07 Income of $1.22 vs. $1.17 in Q2-06 press release of 7-20 Wachovia reported net income of $2.34 billion, or $1.22 per share, in Q2-07 compared with $1.88 billion, or $1.17 per share, in Q2-06. After-tax net merger-related expenses amounted to 1 cent per common share in the second quarters of both 2007 and 2006. ROE in Q2-07 was 13.54% compared to 13.47% in Q1-07 and 13.09% in Q2-06. ROA in Q2-07 was 1.32% compared to 1.34% in Q1-07 and 1.31% in Q2-06. Book value per common share at the end of Q2-07 was $36.40 compared to $36.47 in Q1-07 and $36.61 at the end of Q2-06. Net interest income (Tax-equivalent) in Q2-07 was $4.460 billion compared to $4.497 billion in Q1-07 and $3.675 billion in Q2-06. Net interest margin in Q2-07 was 2.92% compared to 3.01% in Q1-07 and 3.18% in Q2-06. Fee and other income in Q2-07 was $4.234 billion compared to $3.741 billion in Q1-07 and $3.583 billion in Q2-06. Nonperforming assets as % of loans, net, foreclosed properties and loans held for sale was 0.47% in Q2-07 compared to 0.40% in Q1-07 and 0.25% in Q2-06. From the Conference Call: Wacvhovia generated 426,000 new retail bank customers in Q2-07 compared to 550,000 for all of 2006 - annualized at 14% rate of increase. 18% increase in total deposit dollars. LTV of NPAs in residential mortgages was 72% - a good cushion. The trouble the customers are having is due to loss of income or excessive debt outside the mortgage itself. Cross selling to Golden West - mortage consultant in GW branches. They are selling Wachovia checking accounts and those accounts have 30% higher balances than we have on the east coast. NIM - what are drivers in the decline? Trading portfolio was up pressuring margins. Out Bank in Ireland started at they generated slow spread assets. Wachovia is generaing less in fixed rate loans since the begining of Q3 due to Wachovia repricing those loans - and the customers have not yet adjusted to those higher rates. Floating rate loans are continuing at the past rate of increase. Asked about the source of the increase in NPA's - they were primarily Golden West and those were located in the Central Valley of California, esp. Sacramento. The average home value is $350K to $400K - absorption of that high supply is taking longer. On the bright side, the economy is strong and job growth is still good. Will residential NPAs continue - or will it be lumpy? Some of this is driving by seasoning. It should go up for a few quarters and then level off. Were there retention payments recieved by both Wachovia and AG Edwards? Yes. We are combining the two firms and moving HQ. The payments are ment to be a calming influence. We did the same thing with Prudential purchase. With mortgage problems - would you still do Golden West deal again? Yes. the Golden West 'Pick a Pay' product is great - and we should be very happy with the deal two years out. Key to Acquire U.S.B. Holding Co. AP 7-27 Financial services company KeyCorp said Friday it has agreed to acquire U.S.B. Holding Co. Inc., the holding company for Union State Bank, for an estimated $547 million in cash and stock. The deal is worth $547 million based on the 22 million shares U.S.B. had outstanding as of May 1. The purchase price represents a 61 percent premium on U.S.B. shares based on Thursday's closing price of $15.29. When completed, the acquisition will nearly double Key's branches in the Hudson Valley, bring the number to 63. Union State Bank branches are located in Westchester, Rockland, Orange and New York counties in New York, and Fairfield County, Conn. Expanding Banks Bemoan Lack of Qualified Tellers Sudeep Reddy, WSJ 7-17 For years, PNC Bank found it relatively easy to fill the humblest branch job: the teller. Offering modest wages and standard hours, the position required only basic skills and was supposed to diminish with the advent of new technology such as ATMs and online banking. Today, PNC needs more tellers than ever and is having trouble finding them. Throughout the U.S. service economy, companies are stumbling across similar problems as they transform once mechanical front-line jobs into troubleshooting and marketing roles that demand greater abilities. For banks, the entry-level teller position has become the primary way to win new customers and sell new services to existing ones. As a result of that switch, and a boom in the number of bank branches, there's a staffing crunch in the industry that is forcing employers to raise wages, perks and training to get qualified staff. PNC is now targeting retirees, homemakers and college students to fill teller jobs. This month, it also started offering some health benefits for part-time staff in these positions. "Our model has changed," says Kathy D'Appolonia, manager of corporate recruiting at PNC Financial Services Group Inc., the bank's Pittsburgh-based parent company. "In effect, we're competing not only with other banks but all retailers to find staff." The low 4.5% unemployment rate is making hiring difficult for employers of all kinds, pushing up wages at a time when the Federal Reserve is closely watching inflationary pressures. Banks say they face an additional problem: Many of today's high school graduates are no longer equipped with the skills -- from fundamental math to the customer-service touch -- to fill increasingly complicated jobs. "People don't know how to count back change," says J.J. Sanchez, a College of Southern Nevada official who is working with local banks to launch a new teller-training program. "I hear that from everybody. It is a lost art." The federal Bureau of Labor Statistics predicted five years ago that the number of tellers would drop 12% this decade, from almost 500,000 in 2000. Instead, despite the advent of new, labor-saving technologies, the number of tellers rose to 603,000 last year and is expected to edge up in the years ahead. The time when bankers' hours denoted a short workday are long gone: Branches are now often staying open into the evening and weekends. Tellers, who generally have a high-school education, are being positioned to interact more with customers and nudge them toward newer financial services. "It's amazing what customers will tell a teller sometimes," says James Edrington, who runs the American Bankers Association's certification programs, including a new training course for tellers. "If someone's talking about the need for a new kitchen, with a sharp teller the light bulb may go off: 'home-equity line of credit!' " Tellers' median pay was $22,140 in 2006, according to BLS. That will likely soon change. Earlier this year, bank executives listed tellers at No. 2 -- behind business lenders -- among positions requiring "significantly more" pay to attract or retain workers, according to a survey from the bankers' association. Officials at LaSalle Bank, the Chicago-based unit of ABN Amro Holding NV, have started discussing whether teller applicants need an associate degree instead of just a high-school diploma or equivalent. Their worry: bank branches tend to fill more-senior positions from the ranks of tellers. As a result, the company needs people with more education to fill the teller jobs so they can be trained and promoted. "If the teller doesn't have the educational requirements or the background to be in those positions, we end up in the same boat, just higher up," says Wil Lewis, LaSalle's head of talent acquisition for North America. LaSalle has raised wages, matched salaries and put more effort into providing career guidance to help find and retain qualified tellers. Last year, the company teamed up with the College of DuPage, a community college near Chicago, to get qualified tellers in the door. Similar programs have popped up across the country, especially in areas where banks are seeking out new customers, such as low-skilled workers and low-wage immigrants, who previously didn't use banks. Demand is so high that students at Los Angeles Trade-Technical College, which launched a teller-training program two years ago, are being recruited by banks midway through the course, says Allison Tom-Miura, director of the bank-teller program. In Gallatin, Tenn., local bankers appealed over lunch to the president of Volunteer State Community College to help them train tellers. The banks were poaching from each other as they added branches, competing with national chains that were also expanding in the city of 27,000 about 25 miles north of Nashville. "There has been more demand than supply for good, capable tellers," says Ed Mayberry, regional president of GreenBank, a unit of Greene County Bancshares Inc., with 64 branches across Tennessee. "We all have had to become more competitive and aggressive." Volunteer State launched its teller course in February, the month after the lunch with the local bankers. "I was expecting maybe we'd get a dozen people," says John Espey, academic dean of the school's business division. "The enrollment went kind of like 'boom, boom, boom, boom.' " After finding a larger room, the school cut off the spring class at 40 and made plans for another class this summer. Carrie Green, a 22-year-old from nearby Lafayette, worked as a nurse assistant after graduating from high school until deciding that she wanted a career with better long-term prospects. All the banks to which she applied turned her away. A month after Volunteer State's five-week course, which taught everything from how banks work to spotting counterfeit bills, she landed a teller job at Wilson Bank & Trust in Lebanon, Tenn. Ms. Green says she knew "a few things" about banking before the course, but adds: "I didn't realize there was as much to it as there is. I just thought that things happened through the computer." Now she's sticking with her new field and plans to eventually move up. "Where we live, there's not a whole lot of job security," Ms. Green says. "I plan on being in banking until I retire." Ratings Changes On 7-18 Punk, Ziegel Downgraded BAC, Citi, JPM and WB from Buy to Market Perform. On 7-19 CIBC World Markets Upgraded JPM from Sector Perform to Sector Outperform. On 7-24 Citigroup Upgraded WB from Hold to Buy. On 7-25 Punk, Ziegel Downgraded PNC from Buy to Market Perform. On 7-25 Jim Cramer said he'd buy BAC off Wednesday's dividend rise and sell JPM, which is facing big credit risk from all the big buyout deals whose loans are not finding on buyers in the syndicate market. Similarly, Cramer would buy Citi and sell Bear Stearns on similar thinking. On 7-05 PNC declared a dividend of 63 cents per share payable 7-24-07 to shareholders of record 7-13-07. On 7-16 Citigroup declared a dividend of 54 cents per share, payable on 8-24-07 to stockholders of record on 8-06-07. On 7-25 BAC raised its dividend to 64 cents from 56, payable on 9-28-07 to stockholders of record on 9-07-07. Home Page Factoids Previous Update | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||