Today - Thursday, April 2, 2015
- JPMorgan (NYSE:JPM) is on track to meet its mandate to provide billions of dollars in consumer relief to struggling homeowners as part of a settlement it reached over shoddy mortgage bonds it sold before the financial crisis.
- Joseph Smith, the monitor overseeing the settlement, has so far credited Chase with $2.2B out of the $4B it is required to provide to consumers by 2017.
- Chase must also pay $9B in cash, totaling a $13B settlement.
Wednesday, April 1, 2015
- Morgan Stanley (NYSE:MS) gave James Gorman the biggest raise yet among Wall Street CEOs for last year, hiking his pay 25% to $22.5M.
- Gorman collected an annual salary of $1.5M, a cash and stock bonus of $14.5M and longer-term incentive pay valued at up to $6.5M, capping his most lucrative year in his five running the company.
- The MS compensation committee said Gorman exceeded expectations, with the firm’s performance and shareholder returns “strong, with room for continued progress."
- CFO Ruth Porat, who is leaving this month to take the same role at Google, was awarded $13M, up from $12M a year earlier, while Colm Kelleher, who leads the investment banking and trading division, and Greg Fleming, who oversees wealth and asset management, each got $16M, up from $14.5M for 2013.
- Assured Guaranty (NYSE:AGO) paid $804.5M in cash for the business. As of year-end Radian Asset's statutory capital was about $1.3B, and as of Feb. 28, its statutory net par outstanding was about $13.9B.
- The deal boosts the capital base and policyholders' surplus, and is accretive to AGO's earnings, operating shareholders equity, and adjusted book value, says CEO Dominic Frederico.
- Source: Press Release
- Shares +0.5% after hours.
- Previously: Radian +7.8% after agreeing to sale of financial guaranty unit (Dec. 23, 2014)
- Looking for some kind of growth wherever they can find it, banks are about to get their wish as Fair Isaac is set to launch a new credit scoring metric which should expand by tens of millions the field of those eligible to get credit.
- The new score will pull payment histories for things like utilities to calculate credit scores for consumers who might otherwise not have one. Other things - like how often someone changes address - will be used to help calculate a score.
- FICO and 10 unnamed credit card issuers have been testing the new score since November, and Fair Isaac intends to roll things out nationwide by year-end. Right now, about 15M of the 53M previously unscorable Americans can be scored using the new system.
- Source: WSJ
- Among those of interest: WFC, C, BAC, JPM, COF, DFS, AXP
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, IAT, SEF, IYG, FXO, FNCL, KBWB, QABA, FINU, KRU, RWW, KBWR, RYF, FINZ, KRS
- Silver Bay (SBY -0.6%) acquired 2,373 properties in the deal and has another 89 properties under contract with the seller. The purchase price of $252.2M was paid in cash using proceeds from the company revolver.
- Source: Press Release
- Previously: Silver Bay boosts portfolio size nearly 40% with purchase (Feb. 18)
- BB&T's (NYSE:BBT) BB&T Insurance Holdings agrees to significantly boost its partnership interest in AmRisc, LP, and - in a related deal - agrees to sell American Coastal Insurance Company to certain members of the AmRisc management team.
- The sale of AmCoastal eliminates the bank's exposure to potential future underwriting losses, and the net effect of the two deasl isn't expected to have a material effect on BB&T's earnings or capital position. The transactions were included as part of the bank's CCAR submission.
- Source: Press Release
- A key takeaway from a recent Credit Suisse report, writes Bill Stoller, is the hotel sector down 6% vs. the broader REIT sector up 3% year-to-date even as lodging metrics remain strong - supply growth is limited, the macro environment is improving, and RevPAR performance is very solid.
- The underperformance in 2015, however, might be better classified as a breather after hotel REITs outperformed by 2,500 basis points in 2013 and 500 basis points last year.
- Credit Suisse's favorites on the dip: Strategic Hotels & Resorts (BEE -0.6%), RLJ Lodging Trust (RLJ +0.6%), and Sunstone Hotel Investors (SHO +0.3%).
- "We estimate that Marsh & McLennan (MMC +0.2%) can increase its total debt by as much as $2B in the near to medium term with proceeds deployed toward accretive share repurchase and M&A," says Credit Suisse's Ryan Tunis, initiating the stock with a Outperform rating an $62 price target. "This drives upside potential to the consensus view of MMC's ability to return capital relative to Aon (AON +0.2%), which has highlighted FCF growth as the main value creator over the next three years."
- After adjusting for differences in share-based pay, Tunis sees both as having similar 2017 FCF yields, and alongside MMC at Outperform, Tunis starts AON at Underperform.
- Previously: Credit Suisse launches coverage on P&C insurance names (April 1)
- Blackstone (BX +0.8%) is close to an agreement to purchase Almada Forum and Forum Montijo from a fund controlled by Commerzbank, reports Bloomberg.
- The malls could be worth up to €100M each.
- The P-E firm has said Portugal has an "attractive" real estate sector, and late last year bought an office portfolio from Novo Banco - the lender which emerged from the breakup of Banco Espirito Santo.
- Blackstone just raised $14.5B in very quick fashion for its latest real estate fund, and needs to put the money to work (though it isn't clear if this purchase would be part of that fund).
- Previously: Blackstone reportedly raises $14.5B for latest fund (March 30)
- Walker & Dunlop (WD +1%) originates $670M in loans secured by a 52-property portfolio owned by New Senior Investment Group (SNR). The loans were 7-year ARMs under the Freddie Mac Seller/Servicer Program.
- For New Senior, the deal funded the refinancing of 35 assets plus the acquisition of 17 new properties.
- Source: Press Release
- Based in Burlington, VT, Prime Reinsurance was created five years ago as part of the spinoff of Primerica, and Bloomberg is reporting the business as about to go on the block. No valuation estimate is available, but the operation had about $7B in assets as of Sept. 30.
- Among reinsurance names which may have interest could be Reinsurance Group of America (NYSE:RGA), suggests the story.
- A sale would be the latest in a line of dispositions from Citigroup (C -0.1%) boss Michael Corbat as he aims to simplify the bank's operations, and the recent pickup in reinsurance M&A might make this a good time to make a move.
- Previously: Endurance Specialty the winner in Montpelier Re bidding (March 31)
- Previously: RenaissanceRe buying Platinum Underwriters for $1.9B (Nov. 24, 2014)
- The new management agreement with Altisource Asset Management (AAMC +8%) should save Altisource Residential (RESI +6.5%) money immediately, says JPMorgan. Not quite yet sure how to figure the numbers, the teams sees total fees of $35M vs. $68M previously.
- The deal is a long one, however - 15 years with two 5-year extensions - and the analysts don't yet know what the termination fee might be. The agreement could potentially prove a costly one if RESI ultimately ends up owning a portfolio of single family rentals. The base management fee could move to 2% from 1.5%. Combine that with outsourced property management, and RESI would end up with a cost structure not as competitive or scalable as others single family rental REITs.
- Source: Brattle St. Capital
- Previously: Altisource Asset Management inks new management deal with Altisource Residential (March 31)
- Noting both Goldman Sachs (GS +0.9%) and Morgan Stanley (MS +0.6%) have underperformed the broader markets YTD, JMP's Devin Ryan expects gains going forward, but not enough to make him a buyer yet.
- For Q1, Ryan says Goldman looks set to report the better quarter relative to expectations, but both should have good enough results to support current valuations. However, at about 1.2x tangible book value, Ryan isn't seeing a lot of room for multiple expansion.
- "We continue to look for either more dislocated valuations or signs of earnings expansion above our current expectations, to potentially become more constructive on shares at the large cap investment banks."
- Source: Barron's
- Given Simon's (SPG +0.5%) $60B market cap, there aren't a lot of options to move the needle, writes Maureen Farrell, noting Simon lost a hostile bid for Taubman Centers more than a decade ago, and has made a number of failed attempts at buying General Growth Properties. Simon did land Mills Corp. in 2007 in a $7.9B deal.
- “I do think Simon recognized the importance of the Macerich transaction," says BMO's Paul Adornato. A shrewd capital allocator, Simon is likely to redevelop its own properties and renegotiate leases, says Adornato, rather than aggressively acquiring right now.
- As for Macerich (MAC -5%) - though another bid cannot be ruled out - its rejection of Simon is "unlikely to sit well with investors," says Stifel's Nathan Isbee,
- Previously: Macerich board rejects Simon offer (April 1)
10:45 AM| Comment!
- Started at Outperform are ACE Limited (ACE -0.6%), Arthur J. Gallagher (AJG -0.9%), Chubb (CB -0.6%), Marsh * McLennan (MMC -0.5%), and XL Group (XL -0.3%).
- Initiated at Neutral: Arch Capital (ACGL -0.3%), Progressive (PGR -0.9%), Travelers (TRV -1.1%), and Willis Group (WSH -0.8%).
- Started at Underperform: Aon Plc (AON -0.7%) and W.R. Berkley (WRB -0.7%).
9:47 AM| Comment!
- The company in March acquired four distribution warehouse buildings totaling nearly 1M square feet for $62M. For all Q1, STAG acquired five buildings totaling 1.5M square feet for $97M.
- As of today, the company has another 11 buildings under contract for $89M, and LOIs for six more buildings for $33M.
- The occupancy rate slipped to 94.2% from 94.9% at the end of Q4.
- The portfolio size stands at 253 buildings and 48.5M square feet.
- Press release
- In other news, the company through its ATM program issued 417K shares in Q1 for proceeds of $10.1M.
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