commercial banks

Richard Bove is in his prime

Jim Kim — Sun, 03 Aug 2008 22:30:03 -0400

We've noted that analyst Richard Bove is a "reporters' best friend" sort of analyst. At 67, he's been covering banks for 26 years and he's definitely in his prime--he's gotten better with age. "Bove has gained a certain reputation as one of the few bank analysts to predict the blow-up in the housing market and subsequent problems at many banks. He is also one of the few whose advice, if heeded, would have made money for investors over the past year." Few analysts these days are publicizing "who's next" lists of failing banks. He's tough on executives--unafraid of CEOs at Morgan Stanley, Citigroup and others. At Ladenburg Thalmann, he's got what he thinks is a fine perch from which to criticize. He's negative still on investment banks but thinks some commercial banks have turned the corner.

For more:
- here's the Times profile

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

Capital raising to get harder for commercial banks

Thu, 22 May 2008 06:59:54 -0400

We all get the sense that banks are due for some more capital raising. But it comes down, in large part, to upcoming writedowns. If they are much worse than expected, banks will have to hit the capital trough again, notes Investors' Business Daily. The problem is, raising capital will only get harder, especially if we assume the SWF and private equity money has dried up. Many have already pushed to the limit of preferred sales. At some point, common shareholders will be forced to protest the terms and dilutive effects. Common share offerings will be iffy propositions at best. The article makes an interesting point. Commercial banks may have the harder time if other asset classes--auto loans for example--hit some turbulence.

For more:
- here's the article

Commercial vs. investment banks and leveraged loans

Wed, 19 Mar 2008 07:59:54 -0400

When it comes to managing leveraged loans, the Financial Times notes that commercial banks have an advantage. Whereas investment banks have to mark their loans to market, commercial banks can choose to hold the loans in portfolio until they mature. JP Morgan Chase said recently they will hold some loans because they thought the market was undervaluing them. This does involve some capital commitment, however. As for investment banks, get ready for more pain. Deutsche Bank analysts predict Goldman Sachs and Morgan Stanley will write off at least $1 billion in leveraged loans. Lehman Brothers likely will do the same.

For more:
- here's the Financial Times article

Bank of America transition underway

Thu, 20 Dec 2007 06:59:54 -0500

Recall that in the aftermath of its earnings debacle, Bank of America CEO Ken Lewis vowed to exit the business. His memorable phrase: "I've had all the fun I can stand in investment banking." Well, he's making good on his word. The latest is that he's bent on selling the bank's prime brokerage unit. Talks with Citadel are underway, according to the New York Post. The unit is struggling amid executives defections, including former head Christopher Pesce and Steven Winter, who ran the fixed-income side. To some, the broad move to jettison the i-banking side may be an over-reaction, throwing the baby out with the water. In a way, it is another indication that the universalist banking concept in the U.S. anyway never really panned out, despite a lot of hand-wringing by the less commercial banks that Bank of America and Citigroup had awesome advantages in investment banking.

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

Related article:
- Earnings anxiety worsens for Bank of America, others

Read more on: Bank of America l Citigroup

An investment banking power in the making?

Fri, 02 Nov 2007 07:59:54 -0400

There was a time when traditional investment banks really feared the entry of the commercial banks into their once Glass Steagall-protected space. Given the most recent round of earnings, it's clear that Goldman Sachs and Morgan Stanley have little to fear from Bank of America and Citigroup. Is Mitsubishi UFJ Securities destined to be different? The investment banking subsidiary of Mitsubishi UFJ Financial Group is the world's largest bank by some measures. It aims to become a world power. It recently hired Joseph Schmuckler as CEO to manage an international expansion, according to Investment Dealers' Digest. Apparently, it aims to build on its asset management experience to leverage itself into the capital markets and investment banking markets. It has fared well in Japan with Samurai bonds and IPOs and likely will do so elsewhere in Asia soon.

For more:
- here's the Investment Dealers' Digest article

Related article:
- Alternative investment firms to rethink IPOs?

All banks grappling with debt write-down

Tue, 09 Oct 2007 06:59:56 -0400

Citigroup (and Merrill Lynch) got the bulk of the publicity, but a lot of other commercial-type banks will be announcing big write-downs for mortgage-related reasons. While the investment banking-oriented banks fared well (except for Bear Stearns) due to hedging activity, the others will not be so lucky. According to the Financial Times, JP Morgan will post a write-down in the $2.1 billion range. Bank of America will write down about $1 billion. In most cases, these write-downs will cover losses from leveraged loans and mortgage-related losses. Smaller banks will take losses as well. The big boys will be reporting over the next week or so. All of this could be setting the stage for some surprises.

For more:
- here's the Financial Times article

Lewis Ranieri's latest venture

Fri, 05 Oct 2007 06:59:54 -0400

Remember Lewis Ranieri? He's credited with the phenomenal rise of the mortgage-backed market. His exploits at Salomon Brothers were humorously recounted in the Wall Street class's Liar's Poker. He's been active on Wall Street ever since, in lower profile roles. Now he is running an Internet business called Root Markets that links consumers with lenders, thrifts and commercial banks, bypassing mortgage brokers, according to Investment Dealers' Digest. The plan is to make the service available from multiple consumer sites. This is an idea that has cropped up many times, especially back in the dot.com era, when disintermediation was the rage. But perhaps Ranieri and his partner, Marcia Myerberg, will be able to make it happen. We'll see.

For more:
- here's the Investment Dealers' Digest article

Related articles:
- Commercial mortgage market growth spurs companies
- Mortgage-backed securities still hot

Bank fees to rise?

Thu, 20 Sep 2007 06:59:55 -0400

Commercial banks have a lot to worry about as the mortgage meltdown continues. True, the government is aiming to ease their mortgage problems a bit. But the reality is that the volume of activity has plummeted and the non-traditional business isn't coming back. So one way to interpret Bank of America's move to hike ATM fees on non-customers is that it is anticipating the need for more revenue. Other banks have followed suit and are likely glad that Bank of America had the guts to make the move. One issue is whether we're going to see more fee inflation. It's always a tricky thing, with all the consumer advocates. But right now, I think it's a decent bet.

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

SPOTLIGHT: Mid-market banks feeling heat?

Thu, 20 Sep 2007 06:59:52 -0400

Investment Dealers' Digest points out that while mid-market commercial and investment banks have been spared the really large headaches being suffered by their larger peers, they are not immune to the credit crunch. That said, they are in relatively good shape. Article