Sep. 16, 2013, 3:22 PM
Sep. 16, 2013, 7:22 AM
- JPMorgan (JPM), Goldman Sachs (GS), and BofA (BAC) could be out tens of millions of dollars on commitments the banking trio made to help finance the $1.1B buyout of Rue21 (RUE), according to The New York Post.
- Potential buyers of the debt that was created to finance the Rue21 buyout are increasingly skittish with apparel retailers suffering from a weak Back to School season and cutting guidance heading into the holiday season.
- On a valuation basis, the $42 deal price for Rue21 looks quite lush.
Sep. 13, 2013, 12:46 PM
- Following dour management commentary about the mortgage banking slowdown at investor conferences this week, Credit Suisse cuts 2013 EPS estimates at BAC, C, PNC. For Wells Fargo (WFC), estimates for 2014 and 2015 are revised lower by 1% due to worse-than-expected guidance for gain-on-sale margins. JPMorgan (JPM) and U.S. Bancorp (USB) see no cut in the out years as weaker revenue should be offset by better credit performance.
- Indeed, after hearing management commentary, Credit Suisse is forecasting loan-loss reserve declines at every bank in its coverage universe for Q3.
- JPMorgan's presentation is a good indication of what the banks are facing with regards to mortgages. Wells Fargo's too.
- Bank ETFs: KBE, KBWB, KRE.
Sep. 13, 2013, 3:31 AM
- Facing numerous regulatory investigations, JP Morgan (JPM) reportedly intends to allocate an extra $4B on resolving its risk and compliance issues, with the bank also planning to deploy an additional 5,000 workers.
- The bank will spend a further $1.5B on managing risk and complying with regulations, and provision an extra $2.5B for litigation. It has already spent $18B since 2008 in legal expenses.
- "Fixing our controls issues is job No. 1," CEO James Dimon said. "This is a huge investment of people, time and money…but it will make us stronger in the long run."
- The investigations into JPM include those into its London Whaling Loss and mortgage bonds.
Sep. 12, 2013, 2:42 AM
- Verizon Communications (VZ) received orders for $100B of new bonds from over 1,000 investors as it sold $49B worth of debt in the largest corporate-bond offering in U.S. history.
- Everyone seems to have emerged happy from this deal. Verizon received a huge chunk of the money it needs - and at relatively low rates - to pay for the $130B acquisition of Vodafone's 45% stake in Verizon Wireless; the banks involved made $265M in fees, with Barclays (BCS), JPMorgan (JPM), Bank of America (BAC) and Morgan Stanley (MS) each earning about $41M; and investors received a higher-yielding debt from a strong U.S. company.
Sep. 11, 2013, 7:46 AM
- The 13.5% plunge in mortgage applications last week was adjusted to reflect the Labor Day holiday.
- The Refinance Index dove 20%, now off 71% from the May peak, and at the lowest level since June 2009. The Purchase Index dipped 3%.
- The average contract rate for a 30-year fixed mortgage rose 7 bps to 4.80%, with points increasing to 0.46 from 0.33.
- Amid numerous investor presentations by the banks this week, nearly all have warned about ugly Q3 mortgage production (and gain on sale) numbers coming up. Regional players like MTB, BBT, ZION, HBAN, as well as larger names like WFC and JPM will take note.
- ETFs of note: XLF, IYF, PFI, VFH, RYF, RWW, FAS, UYG, FAZ, SKF, SEF, IAI, FXO, PSCF, KBWD, KBWB, IYG, FINU, FINZ, KBE.
Sep. 11, 2013, 4:59 AM
- The Federal Reserve is expected to soon publish guidelines, possibly this month, that would restrict banks' involvement in physical-commodities businesses as part of an attempt to limit the firms' risky activities.
- The new rules could accelerate the withdrawal of JPMorgan (JPM), Morgan Stanley (MS) and Goldman Sachs (GS) from sectors such as metals warehousing, oil shipping and power generation.
- Fed deliberations on the matter come as GS and JPM face scrutiny over allegations that they intentionally drove up prices in aluminum and electricity markets respectively. The latter has already said it will exit the physical business and sell its trading operations, but GS believes it should be allowed to trade.
Sep. 9, 2013, 1:29 PM
- Mortgage market volume reductions have been "dramatic and rapid," says JPMorgan (JPM +0.1%), presenting (slides) at the Barclays Financial Services Conference. Refinance applications are off 60% since interest rates began rising in early May. H2 originations are expected to be off 30-40% vs. H1. Chase is looking to offset this by increasing market share in the purchase market, and notes this rose to 10.7% in H1 vs. 8.6% a year ago.
- Overall, the bank insists it remains well-positioned for rising rates - models show $3.7B in extra income in the next year from a parallel 200 basis point rise in rates. This income would grow even more in subsequent years as JPM invests at higher yields. The capital impact would be small and manageable.
- Improving credit metrics should mean about $1B of reserve releases combined from credit cards and mortgages in Q3.
- The firm's leverage ratio was 4.7% in Q2 and is expected to hit 5% by 2015. JPMorgan's own target is 5.5% over time. The Q2 Basel III Tier 1 common ratio was 9.3% vs. the bank's target of 10-10.5% over time. The bank will resubmit its capital return plan to the Fed before September's end.
- Earlier: The bank responds to risk management concern by appointing two new members to its board.
Sep. 9, 2013, 10:25 AM
- Beefing up risk-management experience on its board following the London Whale losses, JPMorgan (JPM +0.6%) names two new directors - Linda Bammann and Michael Neal. Bammann is a long-time deputy of Jamie Dimon and was head of risk management at the bank until retiring in 2005. Previously, she was head of risk management at Bank One when it was headed by Dimon. She's joining the Risk Policy Committee on September 16.
- Neal is currently vice-chairman of GE and was previously chairman and CEO of GE Capital. He will join the board after retiring from GE in January 2014.
- Their spots on the board were paved with the retirement of David Cote and Ellen Futter - who squeezed past their reelections, but were criticized for a lack of risk management experience (or what experience they had wasn't great).
Sep. 8, 2013, 10:46 PM
- MetLife (MET), Prudential (PRU), Swiss RE (SSREY.OB, SSREF.OB), and JPMorgan (JPM) are among those investing in a new $400M P-E fund being put together by Leapfrog Investments to sell financial services in developing countries.
- The group will disclose Monday it has raised $204M thus far and plans to raise another $200M in coming months.
- The fund is looking at prospective investments in India, Indonesia, and Sri Lanka, as well as parts of sub-Saharan Africa.
- It's no secret developed market insurers have looked to emerging economies for growth, but those efforts previously were aimed at hitting relatively prosperous emerging middle classes, and avoiding the high volume, low margin business of offering financial services to the world's poorest people. This has changed of late and Leapfrog says the big players are increasingly interested in this area. "We see decades of opportunity ahead," says Leapfrog founder Andrew Kuper.
Sep. 6, 2013, 11:27 AM
- Ahead of industry conferences later this month, Credit Suisse offers a preview: The revenue environment remains challenging thanks to low rates and slow loan growth. Mortgage banking activity held up in Q2, but managements are cautious now, and will be touting expense cuts in their mortgage units - meaningful improvement in expenses wasn't notable in Q2 (with the exception of BAC), so look for comments about traction in this area.
- The banks best positioned to grow revenue, manage expenses, and deploy capital in this sluggish environment are Citigroup (C) and JPMorgan (JPM), says the team.
Sep. 5, 2013, 1:14 PM
- JPMorgan (JPM +0.7%) is exiting the student loan business, according to a memo seen by WSJ.
- The bank seems to be quite adept lately at getting out of businesses that have the potential to stir up controversy — the firm announced in July that it would pursue strategic alternatives for its physical commodities business as Wall Street's role in metal warehousing drew scrutiny.
- Some commentators see a bubble in student debt which now totals in excess of $1T all told.
- Non-revolving credit (student loans and car loans) has become the main driver behind consumer credit expansion in the wake of the crisis.
Sep. 4, 2013, 11:22 AM
- JPMorgan (JPM +1.9%) is reportedly the subject of a criminal obstruction of justice probe, according to Reuters, citing several sources. In its early stages, the investigation - conducted by the FBI and the U.S. Attorney in Manhattan - is focusing on whether several employees gave regulators all the information they requested in the energy market manipulation case conducted by FERC.
- A previous criminal probe has been reported, but this was in relation to the manipulation, not obstruction of the investigation.
- Shares are snoozing through the news and remain at a session high.
Sep. 3, 2013, 2:10 PM
- Worst-case estimates of legal losses stemming from pre-crisis mortgage sales at the three largest U.S. banks "are clearly manageable," says Drexel Hamilton's David Hilder. His conclusion comes after studying "reasonably possible losses" in the Q2 filings of BAC, C, JPM, and WFC.
- "Initial estimates of mortgage-related losses and litigation settlement costs were too low ... at this point, more than 5 years since the mortgage-driven parts of the crisis began to explode ... we believe the banks' estimates ... are likely to be more accurate than externally-derived estimates."
- Hilder's view is the consensus one, but (surprise) CLSA's Mike Mayo says Bank of American faces billions more in potential losses owing to the challenge to its $8.5B settlement to resolve $107B in investor losses. The Article 77 hearing over that matter resumes on September 9 following a summer recess.
Sep. 3, 2013, 4:25 AM
- Verizon Communications (VZ) has reportedly started syndicating a $61B one-year bridge loan that will support the company's $130B acquisition of 45% of Verizon Wireless from Vodafone.
- Verizon intends to help pay for the deal with $49B in bonds and $14B in other debt, but might need the bridge loan if it can't issue the bonds by the time the transaction closes, which is expected in Q1 2014. The $63B in funding will replace the bridge loan.
- JP Morgan (JPM), Morgan Stanley (MS), Bank of America (BAC) and Barclays (BCS) are leading the financing and underwriting the deal.
- Meanwhile, Verizon has no plans to enter the Canadian market. The carrier had been linked with a couple of struggling wireless start-ups. The news should be positive for Canada's three largest telecom operators - BCE (BCE), Rogers Communications (RCI) and Telus (TU) - whose shares tumbled in response to Verizon's expansion plans in Canada and then climbed on initial reports of the Vodafone deal.
Aug. 30, 2013, 4:03 AM
- The Department of Justice and the SEC have widened their inquiry into the international hiring practices at JPMorgan (JPM) by questioning numerous other banks and hedge funds, the WSJ reports.
- Authorities are trying to ascertain whether the firms, whose identities aren't clear, broke the U.S. Foreign Corrupt Practices Act by recruiting the relatives of senior government officials or managers of potential customers in order to win deals.
- Meanwhile, the NYT reports that JPMorgan started a program called "Sons and Daughters" in 2006 to address the requests of the friends and family of China's ruling elite to work at the bank. The idea was to use the program to avoid nepotism and bribery accusations, but it appears that things went rather awry.
JPMorgan Chase & Co. is a financial holding company that provides financial and investment banking services. It offers a range of investment banking products and services in all major capital markets, including advising on corporate strategy and structure, capital-raising in equity and debt... More
Industry: Money Center Banks
Country: United States
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