Today - Sunday, December 8, 2013
5:24 AMSEC widens probe into hiring practices at banks
- Goldman Sachs (GS), Deutsche Bank (DB) and Credit Suisse (CS) have reportedly joined JPMorgan (JPM) on the list of banks being investigated for their hiring practices in China. Morgan Stanley and Citigroup are also being scrutinized.
- The SEC is looking at whether the banks breached laws relating to foreign bribery by recruiting the family members of the well-connected in order to win business.
- The probe into JPMorgan has uncovered an email from a senior JPMorgan executive in Hong Kong saying that the bank's recruitment program for family members of senior government and other officials - called Sons and Daughters - had an almost "linear relationship with winning assignments to advise Chinese companies." A spreadsheet tracks JPM's record for converting hires into business deals.
- However, documents that JPMorgan has handed over as part of the investigation don't indicate that executives at the bank's New York HQ knew of the recruitment strategy.
5:15 AMFreezing weather hits airlines, freight companies
- Airlines have canceled over 1,000 flights, while freight companies and online retailers have delayed deliveries, due to severe winter weather across the U.S., particularly in the south.
- American Airlines (AAMRQ, LCC) has been especially affected after more than 400 flights from Dallas/Fort Worth, American's largest hub, were scrapped.
- FedEx (FDX) and UPS (UPS) have also felt the impact of the weather, while eBay (EBAY) has warned of shipment delays.
- Meanwhile, ice storms have cut power to over 200,000 homes from Texas to Tennessee.
- More freezing weather is predicted for tomorrow.
- It's likely to take a while for the economic cost of the storm to be calculated. Insurer Aon (AON) reckons that the losses from the tornadoes and thunderstorms that hit the U.S. last month will top $1B. Allstate (ALL) may take a large hit after towns in Illinois, where it is the second-biggest insurer, were among those to feel the full wrath of the storms.
- ETFs: KIE, IAK, KBWP, KBWI
4:35 AMJudge OKs $500M BofA deal with pension funds over mortgage bonds
- District Court judge Mariana Pfaelzer has approved a $500M class-action settlement between Bank of America (BAC) and pension funds related to problematic mortgage bonds sold by Countrywide from 2004-7.
- BofA said that following the deal, the bank will have resolved up to 75% of its exposure to MBS claims resulting from its purchase of Countrywide in 2008.
- Judge Pfaelzer authorized the deal over the objections of the FDIC.
- The agreement follows a $404M settlement that BofA struck with Freddie Mac over mortgage-repurchase claims, which was announced on Monday last week.
Friday, December 6, 2013
7:06 PMReuters: Carlyle preparing IPO or sale of chemical company
- Sources tell Reuters Carlyle (CG) is preparing to either sell specialty chemical maker PQ Corp. for up to $3B (after factoring debt), or take it public.
- Carlyle paid $1.5B to acquire PQ in '07. Since then, the company has been merged with industry peer INEOS Silicas, and has shed its engineered glass products business (Potters Industries). PQ is estimated to have annual EBITDA of $300M.
- Carlyle will reportedly talk with banks next week to select IPO underwriters for PQ, but will simultaneously continue exploring a sale.
6:45 PMEllington Financial reports book value per share of $23.86
- Ellington's (EFC) estimated fully diluted book value per share of $23.86 on Nov. 30 appears to be off from $24.57 at the end of October, but it includes the $0.77 dividend. Adding that back in shows book value actually grew a hair during November.
- Today's close of $22.61 puts the stock at a 5.2% discount to book and - annualized - the $0.77 quarterly payout is a yield of 13.6%.
- Press release
4:19 PMPlum Creek Timber adds to holdings
- Plum Creek Timber (PCL) grows its core timber management business while adding to its land and non-timber holdings, closing on the purchase of 501K acres of industrial timberlands, associated mineral and wind assets, and interests in about 109K acres of high-value rural and development-quality lands from MeadWestvaco Corporation.
- "By significantly increasing our assets in the Southeast, we expand our presence in key markets, enhance our ability to service customers, and are well positioned to capture value from these assets as markets continue to improve," says CEO Rick Holley.
- Press release
4:14 PMMorningstar spikes into close, expands share repurchase by $200M, hikes dividend
- Morningstar (MORN +1.8%) shares spiked into the close after the company announced a $200M increase to its share repurchase program authorization, bringing the total to $700M, and a 36% quarterly dividend hike to $0.17 (payable Jan. 31 for shareholders of record as of Jan. 10).
- $329.6M of the repurchase authorization is available, which would be good for reducing shares outstanding by 8.8% as of today's close.
2:45 PMRental securitization market set to take off, says Deutsche
- The single-family rental payment securitization market could be a $5B one next year, estimates Deutsche, which led the first such deal - one secured by rents from Blackstone (BX) rental homes.
- Deutsche estimates 90K homes have been purchased by institutional investors over the past two years, with Blackstone leading the way, investing about half of the $15B spent. Next up is American Homes4Rent (AMH +2.4%), buying about 19.8K homes for $3.3B, followed by Colony Financial (a unit of CLNY), Silver Bay (SBY +0.2%), Starwood Waypoint (a unit of STWD and prepping to be spun off), and American Residential (ARPI -0.3%).
- Should the securitization market take off as Deutsche expects, it would provide a sizable new source of cheap financing for these players.
12:37 PMAviv REIT files mixed shelf offering| Comment!
11:42 AMMinus sector giants, mREITs head higher
- There's a bit of green spreading across the mREIT sector this morning as Treasurys reverse an early plunge following the strong jobs report - the 10-year yield is now off 3 basis points to 2.85% after climbing to 2.93% just after the 8:30 ET release.
- However, there's no relief for sector leaders Annaly (NLY -1%) and American Capital Agency (AGNC -1.5%), both of which continue to reel following Goldman's Sell recommendation yesterday - each have carved out new 52-week lows this morning. There may be plenty of players in the mREIT sector, but for the institutional big boys who have the Goldman report on their desks, there's just NLY and AGNC. Others in the red include: Armour (ARR -0.7%) and CYS Investments (CYS -1.1%).
- Posting gains: Chimera (CIM +0.8%), Invesco (IVR +0.2%), Hatteras (HTS +0.2%), Dynex (DX +0.7%), New York Mortgage (NYMT +0.3%), Apollo Residential (AMTG +0.7%), Javelin (JMI +1.1%), AG Mortgage Investment (MITT +2.3%).
- Related ETFs: REM, MORT, MORL.
11:17 AMConsolidation possibilities in apartment REITs
- "It’s very hard to grow in size by doing one-off property acquisitions and one-off property developments,” says REIT analyst Jeffrey Langbaum of the M&A shopping spree for apartment REITs. “If you want to grow in earnest, a big portfolio is one way to do that. You’ve had companies taking advantage of those opportunities.”
- Essex Property Trust (ESS +0.3%) is the latest with its reported $5B bid ($64-$65 per share, though it would probably not be all-cash) for BRE Properties (BRE -0.1%). The deal - should it happen - would add to $22B in apartment REIT purchases in 2013. Before the report of the bid, BRE traded at a 13% discount to its NAV, and next up on the block could be Home Properties (HME +0.6%) and Post Properties (PPS +0.9%), both of which also trade as discounts. A November 22 Citi report pegs Post's NAV at $58.16 vs. a current price $46, and Home's at $73.17 vs. a current $56.
- Associated Estates Realty (AEC -0.3%) is another takeout possibility, says Sandler's Alexander Goldfarb, who estimates NAV at $21.90 vs. the current stock price of $16.33.
- While investors have complained about BRE management's performance, apartment REITs in general have been under pressure amid rising rates this year even as business remains strong. "You have a lot of mismatch in the valuation of apartment buildings or apartment REITs,” says “Long-term factors here are still very stacked on the side of solid growth.” says another analyst.
- Others in the sector: Equity Residential (EQR +0.2%), AvalonBay (AVB +0.4%), UDR (UDR -0.7%), Apartment Investment and Management (AIV +0.4%), Camden (CPT -1.3%), Mid-America (MAA +0.4%).
10:18 AMKBW defends Citi after downgrades
- Citigroup (C +0.9%) remains "a compelling investment on both an absolute and relative basis," says KBW's Fred Cannon, defending the name after it was dropped from Goldman's Conviction Buy list earlier this week, and Deutsche cut it to a Buy.
- Cannon notes Citi is the only big-cap U.S. bank still trading below tangible book value, yet it has one of the strongest capital positions. He expects book to hit $65 during 2015, so if the stock can trade up to book, it's nice upside from today's $51.48.
9:25 AMRBC boosted to Buy at TD Bank
- "Since we initiated coverage on the banks in October, Royal (RY) has moved from a 7% premium to the group back to its long-term average of 3%.," says analyst Mario Mendonca, upping the stock to a Buy with C$80 price target (about $76 in USD terms vs. last night's close of $64.04).
- "We continue to believe that the strong retail results as well as the shift to corporate lending, underwriting, and M&A from pure trading and considerable improvement in domestic commercial loan growth support a premium multiple ... Additionally, we like the diversification Royal’s large capital markets business offers and the improved stability in the capital market business. Importantly, the bank’s fixed income trading business held in better than we expected given the sharply weaker results from the U.S. investment banks."
- Shares +0.6% premarket
9:17 AMPNC settles with Freddie Mac for $89M
- The agreement resolves substantially all indemnification and repurchase obligations on 900K loans originated and sold by PNC to Freddie Mac (FMCC) between 2000 and 2008. PNC will pay Freddie $89M (less credits of $8M).
- This follows an agreement in principal between PNC and Fannie Mae. Both deals require final approvals from the FHFA.
- Press release
7:56 AMWealth management drives revenue gain for Scotiabank
- FQ4 net income of C$1.703B up 12% Y/Y, with EPS of C$1.30 up 10%. Net interest income of $301M up 12% thanks to a 13% increase in assets (ING Direct Canada acquisition) as NIM fell 3 basis points.
- Net fee and commission revenue of $1,788B up 9% Y/Y, driven primarily by higher wealth management revenue. Provisions for credit losses of $329M are about the same as last year. Operating expenses of $2.949B up 9%, with acquisitions accounting for half the growth. Productivity ratio of 53.7% improves from 54.9% a year ago.
- FQ4 results, press release
- Presentation slides
- BNS no trades premarket