PNC

Treasury program shrouded in secrecy

Jim Kim — Tue, 04 Nov 2008 07:54:59 -0500

We noted a while back that the Treasury Department faced a daunting task in choosing which securities to buy as part of the TARP. We suggested it would need lots of help. We can say the same for the on-going program to invest in banks directly. But while the Treasury signs up companies to help it value securities, it does not seem to have plans to retain help to value banks. The New York Times reports that a panel of just five Treasury employees is performing triage, deciding which banks to invest in and which banks to pass on (ostensibly because they are too sick to save). "The process is shrouded in secrecy, its precise goals opaque. Treasury officials have refused to disclose their criteria..." So this is something of a PR snafu. A related issue is whether the Treasury has a secondary goal of prodding healthy banks to buy sick ones. The PNC-National City deal suggested as much. Of course, banks receiving money are being told to lend it. But that's hardly their only option.

For more:
- here's the New York Times article

What should banks do with TARP funds?

Jim Kim — Tue, 28 Oct 2008 19:00:37 -0400

All along, Treasury officials have been stressing that banks receiving TARP funds should be lending it. How else will the funds ease the credit crunch? Now, even the White House is telling TARP bank not to hoard the dough, but to lend it. The government, it should be noted, does not have any voting rights attached to their preferred shares. Loaning out the funds willy nilly may not be a good idea. Nearly 20 banks in the second round got $35 billion each. They are being asked to lend it in a really bad environment. How awful it would be if loaned TARP funds ended up in default. That certainly would be bad for taxpayers. Hoarding the capital, at least until good lending opportunities arise, makes a receivership less likely. And using the capital to make an acquisition has been blessed by the government in at least one case, PNC. My suspicion is we'll see more regional banks take over less healthy local banks. It would be hard to argue with that right now.

For more:
- here's an AP article

Second TARP tranche: unintended consequences?

Jim Kim — Tue, 28 Oct 2008 08:31:24 -0400

The government is encouraging all banks that receive TARP funds to use the money and not just sit on it. Which is reasonable enough. But the deal for National City by PNC, which was made possible by the $7.7 billion PNC will receive from the TARP, has some misgivings. It seems like more banks will use such funds to expand their footprint. City National Bank of California has suggested that it might use its $395 million injection to acquire banks. So this is quite a boon to the 19 regional banks that will receive funds in the second step of the TARP bank investment program. For community banks, this is hardly an ideal situation; it amounts to healthy banks buying healthy banks with public funds, notes The Guardian. All the while making the local banks even more vulnerable. They would have preferred the recipients of TARP largesse to loan the funds to help the economy. A persuasive point. Small community banks may use their cut of the TARP for just that.

For more:
- here's the article from The Guardian
- here's a Reuters article on community banks

Are we in for a spate of regional bank deals?

Jim Kim — Sun, 26 Oct 2008 19:20:14 -0400

It seems like we've been predicting for a while now that more regional banks will be forced to merge. The real catalyst may be the availability of TARP funds. PNC's deal for National City--there had been talks going on even before the TARP was announced--was really made possible by federal funds. PNC will sell preferred shares worth $7.7 billion to the government. The proceeds will pave the way for the National City deal, allowing for "attractively priced" government assistance to help absorb the potential impact on PNC's balance sheet. U.S. Bancorp was in the running for National City, reports the Financial Times. It may be looking for another deal soon. You have to think that other banks are mulling their TARP options with expansion in mind.

For more:
- here's the Financial Times article

An interesting look at the home equity loan bubble

Jim Kim — Thu, 14 Aug 2008 22:10:58 -0400

The New York Times offers a snap history of home equity loans, which used to be known as second mortgages, via the many memorable ads the banking industry churned out. Citigroup's "Live Richly" campaign, which cost some $1 billion from 2001 to 2006, was among the many that urged people to borrow against their homes. As one ad proclaimed: "There's got to be at least $25,000 hidden in your house. We can help you find it." A PNC ad used a wheelbarrow and the line, the "easiest way to haul money out of your house." At some point, debt lost its stigma. Being in debt up to your eyeballs was seen as a decent strategy, as long as you were fully invested in the booming stock market. The number of past due home equity borrowers is now 55 percent above the historical mean.

For more:
- here's the article
- here's the ads

Related Article:
Citigroup's ad campaign to go global

Banks bet on stadium sponsorships

Jim Kim — Fri, 25 Jul 2008 08:00:45 -0400

Does Citi Field have the same ring as Shea Stadium? Well, it likely depends on who you are. Mets loyalists may grumble. But for the bank, it's a nice, albeit expensive, marketing move. Business Week notes some think that Citigroup could use the $20 million a year the sponsorship cost in other areas right now. But such deals are currently popular among commercial banks. Citi seems to have paid a premium. Bank of America bought the rights to the Carolina Panthers' stadium in Charlotte for $7 million a year. Other banks paid even less. M&T, PNC and Comerica have also bought stadium naming rights. For banks, such deals amount to a low-cost way to burnish their brands with the public and associate with a professional team. I'd like to see how the ROI is actually measured. There's risk on both sides. Recall the Houston Astros got stuck with Enron.

For more:
- here's the Business Week article

ALSO NOTED: Another deal in trouble: Bell Canada; Blackstone reaps investment funds as performance tumbles; and much more...

Mon, 19 May 2008 06:59:50 -0400

Company News:
> Blackstone reaps investment funds as performance tumbles. Article
> Citigroup to sell German retail bank. Article
> E*Trade outlook bright? Article
> Lehman to cut jobs this week. Article
> WaMu cuts home equity credit to customers. Article
> PNC a symbol of regional troubles? Article

Industry News:
> Another deal in trouble: Bell Canada. Article
> New Fed securities-swap facilities stoke controversy. Article

And Finally... People trading down to cheap beer. Article

ALSO NOTED: Wachovia to take big charge due to court ruling; Och-Ziff founder fares well; and much more...

Thu, 01 May 2008 06:59:50 -0400

Company News:
> Wachovia to take big charge due to court ruling. Article
> Analysts sour more on Countrywide. Article
> PNC private equity unit sells food maker. Article
> Despite stock swoon, Och-Ziff founder fares well. Article

Industry News:
> Police hunting for hedge fund fraudster in Canada. Article
> Cramer: The only non-toxic banks. Video
> Banks need to come clean on capital needs. Article
> Book about Eliot Spitzer coming soon. Article

Regulatory News:
> SEC must give up documents in Aguirre case. Article

And Finally... Is a liberal arts degree a waste in the job market? Article

ALSO NOTED: Morgan Stanley CFO says firm cut exposure in first quarter; Lehman Brothers shorts taking a bath?; and much more...

Wed, 02 Apr 2008 07:59:50 -0400

Company News:
> S&P no longer reviewing Morgan Stanley. Article
> Lehman Brothers capital plans applauded. Article
> O'Shaughnessy Asset Management completes split from Bear Stearns. Article
> Lehman Brothers shorts taking a bath? Article
> Citigroup analyst still bullish on Lehman Brothers. Article
> Fitch revises outlook on Lehman Brothers down. Article
> Morgan Stanley CFO says firm cut exposure in first quarter. Article
> PNC closes sale of Hilliards Lyons. Article
> Jamie Dimon gets $28 million in 2007. Article

Industry News:
> Market indicating that the worst is over? Article
> Bubble bursts in Shanghai. Article
> Institutions warming back up to stocks? Article

And Finally... What your car says about you. Article

C&L: Executive Moves

Wed, 12 Mar 2008 07:59:51 -0400

> Peter Kraus steps down at Goldman Sachs
> Stephen Wynne tapped as CEO of PNC global investment unit
> Bank of America names Robin Yacovino president for Western Massachusetts
> Ken Hight tapped as LiquidNet MD for Canada
> Carlyle hires three from Singapore bank
> Cindy Flanders tapped as a global commercial banking regional exec at B of A
> Tim Ingrassia tapped as M&A head at Goldman Sachs