Large U.S. banks' stocks in capitulation mode: Merrill Friday June 20, 10:04 am ET (Reuters) - U.S. large-cap regional banks' stocks now appear to be in "capitulation mode" and will likely trade below fair value in the near term as more dividend cuts and capital raises, high credit risk and an uncertain earnings outlook all weigh on their share prices, an analyst at Merrill Lynch said. Analyst Edward Najarian said he does not expect credit metrics to recover until 2010 and forecast more dividend cuts and capital raises at banks, including Bank of America Corp (NYSE:BAC - News) and Wachovia Corp (NYSE:WB - News), in the second half of this year. Najarian also slashed his earnings estimates by an average of 22 percent for 2008 and 19 percent for 2009. He said the cuts were largely due to higher loan losses, as well as an increase in loan loss reserve building. "Our higher credit loss outlook is driven by higher loss assumption in nearly all consumer and commercial loan categories ... we have especially increased our loss assumptions for residential construction loans and home equity," Najarian wrote in a note to clients. The analyst expects the median net charge-off ratio of large regional banks to triple to 1.14 percent in 2008, while loan loss provision-to-loan ratio is expected to increase to 1.87 percent in 2008 from 0.57 percent a year ago. Second-quarter earnings, among the large regional banks, is expected to be "especially weak" compared with prior quarters, Najarian said, adding that Bank of America and Wachovia may miss second-quarter Wall Street estimates by the greatest percentage. He said earnings in the second quarter will likely come in a median that is 18 percent below consensus estimates mainly due to much higher net credit losses, more loan loss reserve building, and a lack of one-time Visa Inc (NYSE:V - News) related gains that helped most large banks in the first quarter. MORE DIVIDEND CUTS The analyst expects dividend cuts or capital raising, or both, at Bank of America, Regions Financial Corp (NYSE:RF - News), SunTrust Banks Inc (NYSE:STI - News) and Wachovia in the second half of the year. He said any of those moves would push the shares lower. Dividend cuts or capital raises at banks are likely to significantly dilute existing shareholders, as banks raising capital will now have to do so at much lower stock prices than if they had during the first quarter, the analyst said. In addition, the market's recent reaction to convertible and common equity issuances has been to heavily discount stock prices resulting in greater shareholder dilution, he added. "We note that Bank of America, Regions Financial and Wachovia have already raised capital since the first quarter, and we think future attempts to raise additional capital will likely result in further downward pressure on the stocks," Najarian said. Shares of Bank of America were down about 4 percent to $27.15, while Wachovia shares fell 4.5 percent to $16.96 in Friday morning trade on the New York Stock Exchange. Regions Financial was down 5 percent at $10.62, SunTrust down about 6 percent at $33.29, KeyCorp (NYSE:KEY - News) down 2 percent at $11.17 and BB&T Corp (NYSE:BBT - News) down 1 percent at $24.20. The KBW Bank Index (Philadelphia:^BKX - News) was down nearly 3 percent. (Reporting by Tenzin Pema in Bangalore; Editing by Anil D'Silva and Bernard Orr)
has this been posted: http://www.marketwatch.com/news/sto...x?guid={FA23DF5A-918F-41DA-B794-7E553ADAFAA7} http://www.fxstreet.com/news/forex-news/article.aspx?StoryId=1d4411be-7553-4ee2-a980-19237cfd2e17
Merrill shares fall on rumors of profit warning Friday June 20, 10:15 am ET NEW YORK (Reuters) - Merrill Lynch & Co (NYSE:MER - News) shares fell 5.5 percent Friday on rumors that the investment bank may issue a profit warning and take additional write-downs on its mortgage holdings, traders said. The rumors also weighed on U.S. and European stocks. A Merrill spokeswoman declined to comment on the rumors. The world's largest brokerage is due to announce second-quarter results next month. Investors are concerned about its performance after peers including Lehman Brothers (NYSE:LEH - News) and Morgan Stanley (NYSE:MS - News) posted weak results this week. Merrill has recorded more than $30 billion of write-downs since the 2007 third quarter and has raised more than $12 billion of capital. The company's chief executive, John Thain, said last week that Merrill did not need more capital but would consider selling its stakes in Bloomberg and money manager BlackRock (NYSE:BLK - News) if it did. In a research note last week, analyst Roger Freeman of Lehman Brothers said Merrill appears increasingly likely to raise additional capital. Freeman also said he expected Merrill to post additional write-downs from collateralized debt obligation and subprime exposure. Merrill shares fell $2.07 to $35.62 in morning trade on the New York Stock Exchange. (Reporting by Elinor Comlay; editing by John Wallace)
How realistic is UBS going bankrupt?? I think we can call the first winner TMA. But they never had access to the discount window so who else is next?
<b> Sunday evening June 22 2008 Breaking News on Citi</b> AP Report: Citigroup to slash investment-banking jobs Sunday June 22, 8:02 pm ET Report: Citigroup will slash thousands of investment-banking jobs worldwide NEW YORK (AP) -- Citigroup is preparing fire thousands from its worldwide investment-banking division, The Wall Street Journal reported on Sunday. The Journal, citing people familiar with the matter, said the layoffs are part of a plan to cut about 10 percent of the staff of the 65,000-member investment-banking group. Messages left with Citigroup spokesmen on Sunday were not immediately returned. The Journal said the fired employees could be notified as early as Monday. The New York-basked global bank, along with much of Wall Street, is in the throes of recovering from bad investments on mortgages and leveraged loans that cut billions of dollars from its portfolio. It was not immediately clear if the reported job cuts would be in addition to cuts announced by Citigroup in April. After reporting a $5.1 billion first-quarter loss, the bank said then it was reducing its staff by 9,000, in addition to the 4,200 job cuts the bank announced late last year. As of the end of last year, Citigroup had about 147,000 full-time employees. In May, Citigroup unveiled a three-year plan that included getting rid of more businesses, mortgages, real-estate operations and jobs. The bank called for shedding between $400 billion and $500 billion of its $2.2 trillion in assets and growing revenue by 9 percent over the next few years as it tries to rebound from the huge losses tied to deterioration in the credit markets. Earlier this month, the bank said it was closing the Old Lane Partners hedge fund that was co-founded by Chief Executive Vikram Pandit. The bank is shuttering the fund just 11 months after it was acquired for more than $800 million.
Citigroup sinks to 10-year low, Goldman urges short sale Thursday June 26, 10:53 am ET By Neha Singh BANGALORE (Reuters) - Citigroup Inc (NYSE:C - News) shares fell to their lowest level in nearly a decade after a Goldman Sachs & Co analyst said investors should sell the largest U.S. bank's stock short as losses mount from troubled debt. In morning trading, the shares were down $1.03, or 5.5 percent, at $17.82 on the New York Stock Exchange. The shares were among the biggest drags on the Dow Jones industrial average (DJI:^DJI - News) and Standard & Poor's 500 (^SPX - News), which both fell more than 1 percent. They also touched their lowest level since October 1998, the month that Sanford "Sandy" Weill merged his Travelers Group with Citicorp to create Citigroup. William Tanona, the Goldman analyst, added Citigroup to Goldman's "Americas conviction sell" list and cut his price target on the stock to $16 from $20. He recommended a "paired" trade in which investors sell Citigroup shares short, betting on a decline, and buy Morgan Stanley (NYSE:MS - News) shares. The analyst said Citigroup might take $8.9 billion of write-downs for the April-to-June period, leading to its third straight quarterly loss. He also said the bank might need to cut its quarterly dividend for a second time this year, after lowering it 41 percent to 32 cents per share in January. Tanona's forecast suggests deeper problems for Citigroup Chief Executive Vikram Pandit, who is trying to turn the bank around after nearly $15 billion of losses in the last two quarters, and more than $46 billion of credit losses and write-downs since the middle of 2007. "We see multiple headwinds for Citigroup including additional write-downs, higher consumer provisions as a result of rapidly deteriorating consumer credit trends, and the potential for additional capital raises, dividend cuts, or asset sales," the analyst wrote. Pandit became chief executive in December, replacing Charles Prince, who resigned under pressure the previous month. Weill had hand-picked Prince as his replacement when he gave up the top job in 2003. Last week, Chief Financial Officer Gary Crittenden said on a Deutsche Bank conference call that Citigroup could take substantial write-downs this quarter. DIVIDEND CUT MAY BE NEEDED Tanona said Citigroup might write off $7.1 billion related to collateralized debt obligations and associated hedges related to monoline insurers, $1.2 billion for other asset classes and $600 million for structured note liabilities. He now expects Citigroup to lose 75 cents a share this quarter, compared with his earlier forecast of a profit of 25 cents. He also expects a full-year loss of $1.20 a share, compared with his prior view for a profit of 30 cents. As of May, Citigroup had raised some $42 billion since last fall, including injections from sovereign wealth funds, data compiled by Reuters News show. Tanona said the bank may now need to issue common stock or sell assets to raise capital, because regulators may forbid it from issuing more preferred or convertible securities. He also said halving the dividend could preserve $3.5 billion a year. "Given the firm's current level of earnings power, we do not believe the dividend is safe," Tanona wrote. A Citigroup spokeswoman declined to comment. On June 24, Merrill Lynch analyst Guy Moszkowski projected $8 billion of write-downs for Citigroup. Tanona also downgraded the U.S. brokerage sector to "neutral" from "attractive," saying deteriorating fundamentals will likely prolong any recovery from the credit crunch. He projected a $4.2 billion second-quarter write-down for Merrill Lynch & Co (NYSE:MER - News), leading to a quarterly loss for the largest U.S. brokerage. "We expect write-downs for Citigroup and Merrill to outpace what we saw from Morgan Stanley (NYSE:MS - News) and Lehman Brothers Holdings (NYSE:LEH - News) recently, due to Citigroup's and Merrill's large exposures to ABS CDOs (asset-backed security CDOs) and associated hedges with the monolines," Tanona wrote. Brad Hintz, a Sanford C. Bernstein & Co analyst, on Thursday projected a $3.5 billion second-quarter write-down for Merrill. Banc of America Securities analyst Michael Hecht made the same forecast earlier this month. On June 17, Goldman analysts led by Richard Ramsden said U.S. banks may need $65 billion more capital to cope with a global credit crisis that will not peak until 2009. (Additional reporting by Tenzin Pema in Bangalore; Editing by Vinu Pilakkott)