Dividends, the best source of capital right now?

Jim Kim — Tue, 22 Jul 2008 08:30:33 -0400

We've noted that most big banks have fewer options when it comes to capital raising. Public offerings are increasingly hard, given concerns about dilution, among other things. Outside investors have been licking their wounds as their early investments have really tanked. So that leaves asset sales and dividend cuts. Asset sales can be a tricky, especially at a time when valuations are an issue. Just ask Merrill Lynch. And for the second time in three months, Wachovia has cut its dividend. It now will pay a nickel a share, compared with 37.5 cents earlier, and 60 cents a share at the start of the year. The move will effectively raise $700 million each quarter. This, of course, is bad for shareholders, but in this environment, what choice did the bank have? It's second quarter earnings were much worse than anticipated--a loss of $4.20 a share. Analysts were expecting 78 cents a share. Ouch. The fourth largest U.S. bank is also slashing 6,350 jobs.

For more:
- here's the AP article

Is Lehman Brothers' future any clearer?

Jim Kim — Mon, 09 Jun 2008 21:25:18 -0400

This is what a Portfolio commentary says about Lehman Brothers' pre-announcement: "... there's a definite feeling of slow-motion trainwreck here. Still, at least the slow-motion bit is a good thing: It means that Treasury and the Fed have that much more time to find someone with credibly deep pockets willing to buy the bank outright." That's strong stuff (especially in light of the new Fed facilities). But I doubt we're at the Bear Stearns level yet. Still, between now and Monday, when Lehman's second-quarter earnings come out, there's still time for one more round in the long-short war over the stock. The news was not the knock-out punch the company was hoping for. The stock sank nearly 9 percent on the news, but the fight is still on.

For more:
- here's the Portfolio item
- C.V. Starr & Co. is bullish on Lehman Brothers. Article
- David Einhorn is still skeptical. Article | More
- New York Times Columnist: Lehman never saw it coming. Column

Second Quarter Earnings

Dividends, the best source of capital right now?

Is Lehman Brothers' future any clearer?