Wachovia

Wells Fargo stays on message point

Jim Kim — Mon, 25 Aug 2008 13:21:15 -0400

One way to rebut rumors is for top executives to stay slavishly on point when they speak to the media. Wells Fargo seems to be doing just that. CEO John Stumpf repeated to the Financial Times that the big San Francisco bank, which has fared well during the credit crisis, is not interested in a transformational-type deal. "Not impossible but highly unlikely," he said. So the message to the market is to not link the bank to a big takeover of a troubled bank, like Wachovia. Wells Fargo, however, is interested in wealth management and insurance distribution companies. If there's one financial services industry that has fared well in the credit crunch, it's wealth management. Barclays also said that it was interested in such companies.

For more:
- here's the Financial Times article

Wachovia turnaround underway?

Jim Kim — Tue, 12 Aug 2008 08:08:23 -0400

The pressure is on for Robert Steel, the new CEO of Wachovia, who has raised the number of jobs the bank will cut. The AP reports that in a quarterly SEC filing, the bank says it expects to eliminate 11,350 positions, including 6,950 active employees and 4,400 open positions. That's about 600 more than previously planned. All will be in the mortgage area. Wachovia estimates that all cost-cutting steps will boost Tier 1 capital by more than $5 billion by the end of 2009. A lot is riding on the state of the real-estate economy. If the situation improves measurably, Wachovia would certainly benefit. To be seen as a pure play-like winner, it would need to clear up all the regulatory issues. The latest is that its municipal derivatives group is under investigation.

For more:
- here's the AP article

Auction rates securities settlements in perspective

Jim Kim — Fri, 08 Aug 2008 07:37:27 -0400

The news that Citigroup and Merrill Lynch will reimburse individual investors burned by auction rate securities to the tune of $17 billion is certainly eye-catching. The New York Times notes that the Citigroup action (Merrill's offer was not part of the settlement) represents "among the largest amounts ever recovered by investors from a single company as a result of regulatory action." Morgan Stanley got in on the act, agreeing to reimburse some small towns in MA. These actions set a precedent of sorts for other banks--Lehman Brothers, JPMorgan Chase, Wachovia, Bank of America and others--that are in similar straights due to their marketing of ARSs. All of this will affect the bottom line, and hopefully it will end the matter. What remains to be seen is whether Citigroup's $100 million penalty reflects a premium over other penalties given the alleged destruction of relevant evidence.

For more:
- here's the article

More financial advisors hiring psychologists

Jim Kim — Tue, 05 Aug 2008 14:30:28 -0400

There was once a day when advisors used to give clients a lame risk tolerance questionnaire. The industry has certainly changed. Now advisory firms are adding psychologists to their staffs, to help with a wide array of financial, familial and advisor training issues, reports Investment News. Wachovia just hired a full-time associate director of family dynamics for one of its wealth management units. Bank of New York Mellon Corp., Commonwealth Financial Network of Waltham, Mass., and Wells Fargo & Co. also use psychologists and therapists. In many cases, the psychologist get directly involved with client issues. This is a great idea, a way to help tether clients to the firm, boosting wallet share. Which is what the industry is all about. It may be hard to quantify the ROI, but it can't hurt.

For more:
- here's the Investment News article

States gets aggressive on auction rates securities

Jim Kim — Thu, 31 Jul 2008 13:08:38 -0400

States are getting busy when it comes to auction rate securities. Missouri raided the St. Louis office of Wachovia Securities in its probe. New York Attorney General Andrew Cuomo has charged UBS with illegally promoting auction rate securities as safe investments when executives knew they were anything but. Now Massachusetts has gotten in on the act: It similarly charged Merrill Lynch with promoting auction rate securities as much safer than they were, the AP reports. Once again, email forms the main evidence. One from a Merrill Lynch executive in November read, "Market is collapsing. No more $2k dinners at CRU." Interestingly, the complaint also charges that Merrill Lynch somehow got its research department in on the act, allowing the sales staff to push for research that would endorse "the safety and high quality" of auction-rate securities. Sleazy if true.

For more:
- here's the AP article

Should Goldman Sachs buy a bank?

Jim Kim — Wed, 30 Jul 2008 13:42:02 -0400

People tend to assume Goldman Sachs wields extraordinary power over Wachovia. The recent appointment of Robert Steel, a former Goldman Sachs executive, as the troubled bank's new CEO only seemed to confirm the godly influence of the premier investment bank. So perhaps it was inevitable that rumors would crop up that Goldman Sachs was taking a look at buying Wachovia. TheDeal.com explores the issue a bit, noting among other things that such a deal might work as a massive defensive move. Merrill Lynch's Guy Moszkowski fanned the issue with a recent report that noted Goldman has internally discussed buying a commercial bank. No doubt it has taken an analytical look, but it's doubtful that the bank is convinced it needs a retail base of deposits to act as a buffer of sorts. Still, who knows? These are extraordinary times.

For more:
- here's the post on TheDeal.com

What's Jamie Dimon waiting for?

Jim Kim — Wed, 30 Jul 2008 13:39:37 -0400

Most people assume the cagey Jamie Dimon is angling to make another purchase, specifically one to build the retail-bank side of the firm. The rumors are heavy regarding several companies, notably SunTrust with its strong Southern footprint and troubled Washington Mutual. Both are, ahem, attractively priced right now. Wachovia may also be a candidate for some kind of a deal. JPMorgan Chase is one of the few large banks well positioned to make deals right now. Citigroup has numerous issues to deal with, including capital troubles, and Bank of America has it hands full with the tricky Countrywide integration, so Dimon can afford to be choosy. Or can he? CNNmoney.com notes that a possible accounting change forcing banks to add off-balance sheet assets to their balance sheets could make it much harder to do a deal. So we may see a deal soon--or not at all.

For more:
- here's the CNNmoney.com article

Wachovia CEO buys shares

Jim Kim — Sun, 27 Jul 2008 13:58:09 -0400

More CEOs need to do this: Robert Steel, newly minted CEO of troubled Wachovia, has purchased 1 million shares of Wachovia stock at a personal cost of more than $16 million. The bank needs to make this a bigger deal from a public relations point of view. I have suggested in the past that top executives, especially those who are on the hot seat, could do better than foregoing their annual bonuses. They need to make a direct show of confidence by taking a chunk of their own money and investing it in their banks. I have a feeling that Steel will likely do all right over the long term. I doubt that such a move would have made a difference in the case of deposed CEOs like Stanley O'Neal or Charles Prince. Still, this would be a good time for John Thain of Merrill Lynch, John Mack of Morgan Stanley, and especially Richard Fuld of Lehman Brothers to put their money where their mouths are.

For more:
- here's an article on Steel from bizjournals

Bad bank news is all relative

Jim Kim — Wed, 23 Jul 2008 07:09:00 -0400

When is bad news really good news? When the bad news is not nearly as bad as expected, notes the New York Times. You could almost feel the relief wash over the markets as many top banks (except Washington Mutual and Wachovia) released earnings that were bad--even horrific--but still better than expected. Now, one could argue that the armies of investor relations people out there are working the Street's fear to their advantage; expectations were certainly set low. Another view is that we are finally at the bottom, that the worst is over. Of course, we've heard that before from the top execs at the top banks, so it would be wise to view the ferocious rally we've seen in bank stocks with some skepticism. It may yet prove to be a dead-cat bounce. The mortgage market doesn't seem to be getting much better, with Fannie and Freddie's woes.

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

Washington Mutual lays an egg

Jim Kim — Tue, 22 Jul 2008 17:53:52 -0400

Things were looking good for much of the commercial bank sector this week. The upside surprises from the likes of Citigroup, Bank of America and Wells Fargo were welcome news. Unfortunately, Washington Mutual just joined Wachovia in raining on the parade. WaMu, the big thrift, reported a loss of $6.58 a share. That figure excludes the effects of a one-time charge of about $3.24 a share to cover the cost of raising capital in April. Excluding that, it lost $3.34 a share versus expectations of a $1.05 loss, so this is a pretty awful quarter. The results reflect a hike in loan loss reserves of $3.75 billion. The bank did say it thinks 2008 will be the peak year for this loan loss reserve hike--which may be a bad omen for the next two quarters. The bank also announced that it intends to save $1 billion; it will start by denying CEO Kerry Killinger annual incentive payments this year. That will not likely console many. You have to wonder about his future.

For more:
- here's the release