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BAC to Take $3 billion Writedown AP 11-13 Bank of America Corp said it will take a $3 billion debt-related writedown in Q4-07 and warned its losses could grow as the market wrestles with the fallout from the housing and mortgage-lending slump. Speaking at an investor conference in New York, chief financial officer Joe Price added that the bank is also setting aside more money for potential losses but considers the losses "manageable." Last week, crosstown rival Wachovia marked down the value of its loan-backed securities by about $1.1 billion. Mortgage-related writedowns across the banking industry were more than $40 billion in Q3-07, and Q4 could end up being worse. Along with Bank of America and Wachovia, Citigroup has said it will write down as much as $11 billion. Abu Dhabi's Sovereign Fund Agrees to Invest $7.5 Billion for a 4.9% Stake in Citigroup AP 11-26 Citigroup announced that the Abu Dhabi Investment Authority will invest $7.5 billion in the nation's largest bank, offering needed capital to offset big losses from mortgages and other investments. The cash will be convertible into no more than 4.9% of Citigroup's equity. Citigroup characterized the investment as passive and said the fund will not be able to name any board members to the bank. The Investment Authority will receive equity units that pay an 11 percent annual yield until they are converted into Citigroup common shares at a price of up to $37.24 a share between March 15, 2010, and Sept. 15, 2011. Wells Fargo to Take Special Provision of $1.4 Billion to Bolster Reserves PRNewswire 11-27 Wells Fargo announced it will further tighten its home equity lending standards and will take a special fourth quarter 2007 provision of $1.4 billion (pre-tax), largely for higher losses it now expects in certain indirect channels through which it no longer is accepting business. WFC will no longer originate home equity loans through wholesalers where the combined loan-to-value ratio of the first and second mortgages is 90% or higher, or where the second mortgage is not behind a Wells Fargo first mortgage. As previously announced, WFC is no longer acquiring home equity loans through correspondent relationships, including other financial institutions and other mortgage companies. While the $11.9 billion of loans in this liquidating portfolio constituted only about 3% of Wells Fargo's total loans outstanding as of September 30, 2007, the loans represent the highest risk in WFC's $83.4 billion National Home Equity Group portfolio. Losses in this liquidating portfolio are currently expected to total approximately $1 billion over the course of 2008 and 2009 and are expected to diminish over time as the loans are resolved or repaid. WFC expects to apply actual quarterly charge-offs in the liquidating portfolio against the special reserve. Punk Ziegel Analyst Upgrades Banks AP 11-27 Punk Ziegel & Co. analyst Richard Bove upgraded shares of several banks Tuesday saying some had fallen far enough and that the others have avoided, or have limited exposure, to industry troubles. Banks have been hit hard by rising defaults among mortgages, especially subprime loans given to customers with poor credit history. As more mortgages have defaulted, banks have been forced to increase reserves to cover the losses, and have had to write down the value of bonds and securities backed by the troubled mortgages. Nearly all banks have posted declining earnings in recent quarters, with many recording losses in the third quarter due to the deteriorating mortgage market. Bove said Key Corp. "has overshot on the downside." Earnings might be only slightly improved in 2008, but are likely to be meaningfully higher in 2009, Bove said. He upgraded the shares to "Market Perform" from "Sell." Bove also boosted his ratings on PNC Financial Services Group, BB&T and Regions Financial to "Buy" from "Market Perform." PNC has largely been able to avoid the declines in the current market because it's not in subprime lending or credit derivatives to any great degree, Bove said. Bove said BB&T, like PNC, has limited exposure to the weakest parts of the financial services market. The Mid-Atlantic and Southeast regional bank also operates in one of the stronger economic regions of the U.S., Bove said. Despite troubles in Florida and declining margins related to its acquisition of AmSouth Bank, earnings at Regions are likely to rise in 2008 and 2009, Bove said. Regions' share price has fallen too far, Bove wrote, making it an attractive time to buy the stock. "It is simply too cheap to pass up," he wrote. Ratings & Dividend Changes On 11-15 KEY declared a dividend of $0.365/share payable December 14, 2007 to shareholders of record on November 27, 2007. On 11-15 STI declared a dividend of $0.73/share payable on December 14, 2007, to shareholders of record at the close of business on November 30, 2007. On 11-14 Punk, Ziegel & Co Upgraded BAC from Market Perform to Buy. On 11-01 CIBC World Markets Downgraded BAC from Sector Outperform to Sector Perform. On 11-27 Punk, Ziegel Upgraded C from Market Perform to Buy. On 11-06 Banc of America Sec Downgraded C from Buy to Neutral. On 11-05 Punk, Ziegel & Co Upgraded C from Sell to Market Perform. On 11-01 CIBC World Markets Downgraded C from Sector Perform to Sector Underperform. On 11-01 Credit Suisse Downgraded C from Outperform to Neutral. On 11-12 Keefe Bruyette Downgraded WB from Outperform to Market Perform. and Morgan Keegan Downgraded WB from Outperform to Market Perform. On 11-09 Friedman Billings Downgraded WB from Market Perform to Underperform. On 11-07 Sandler O'Neill Downgraded WB from Buy to Hold. On 11-16 Keefe Bruyette Downgraded WFC from Outperform to Market Perform. On 11-14 Punk Ziegel's Richard Bove cut his price targets on Wachovia Wells Fargo, and said the banks were facing higher loan losses and bad loans. But Bove maintained a "buy" rating on Wells Fargo. He noted that the bank had maintained a more traditional banking profile and did not become involved in many asset-backed securities collateralized debt obligations deals or start structured investment vehicles. It was not heavily involved in the hedge fund business and did not participate in many bridge loan transactions, he said. However, Bove cut his price target on Wells Fargo to $36 from $42 saying the bank was not immune to the decline in housing activity and is experiencing an increase in bad loans. He cut his 2007 earnings view on WFC to $2.70 a share from $2.73. Bove cut his price target on Wachovia to $44 from $53 and said the bank could have a loan loss provision of a minimum of $700 million to $800 million in the fourth quarter, and trading losses in excess of $1 billion to reflect the mark-downs of its ABS CDO portfolio. "The company has been notably unaware of the importance of timing and overly fixated on growth through acquisitions. The shareholder is paying a price for this ebullience," he said. However, if the "bad acquisitions and bad decision making on product growth" are stripped away, Wachovia is one of the nation's best banks at the core, Bove said. He has a "market perform" rating on the stock. He cut his 2007 earnings view on WB to $3.86 a share from $4.40. Home Page Factoids Previous Update |