Fri, Feb. 26, 11:13 AM
- In another sign of the difficulties lower-rated credits are having with borrowing, Goldman Sachs (GS +2.1%) is having a hard time moving $2B in paper backing the buyout of Solera Holdings, reports the WSJ.
- Solera late last year agreed to an LBO to Vista Equity Partners for $6.5B, including debt.
- The bonds backing the sale carry an especially weak Caa1 rating from Moody's, and it's in these lower-rated tranches where the worst of the high-yield carnage has taken place. Demand "is really nonexistent now," says one portfolio manager.
- Goldman had hoped to unload the Solera bonds at a price to yield about 10%, but by midday yesterday had only found buyers for about half of the paper, and pricing had moved above 11%.
- As painful as it is for borrowers, it's also so for the banks which earn big fees from lending commitments - great when the bonds are easy to move, but a profit eater when the stuff has so sit on the books for very long. Goldman, in particular, has sought to boost market share in this part of the business against traditional powerhouses like Bank of America (NYSE:BAC) and JPMorgan (NYSE:JPM).
- ETFs: HYG, JNK, HIX, HYLD, DHY, PHT, EAD, HYT, JQC, CIK, DSU, HHY, SJB, PHF, NHS, FHY, ACP, MCI, KIO, VLT, ARDC, ANGL, CIF, AIF, MHY, PCF, MPV, DHG, HYLS, IVH, JSD, UJB, GGM, CJNK, QLTC
Tue, Feb. 23, 6:13 PM
- Cash-strapped energy companies are coming under increasing pressure from U.S. bank lenders and could see an average 15%-20% cut in their credit lines, the head of JPMorgan Chase's (NYSE:JPM) commercial bank says.
- Banks had been more lenient with energy clients despite the prolonged slump in oil prices, but JPM's Doug Petno says that is changing, as companies such as Linn Energy (NASDAQ:LINE) and SandRidge Energy (NYSE:SD) max out revolving credit lines.
- Petno says JPM is not waiting for April redetermination, when banks traditionally reassess the value of oil reserves underpinning energy loans to reassess its exposure.
- JPM says it plans to increase provisions for expected losses on bad energy loans by more than 60% during Q1.
- Earlier: Banks lower as JPMorgan warns on energy
Tue, Feb. 23, 2:38 PM
- Holding its investor day today, JPMorgan said it was going to add another $500M to energy-related loan-loss reserves. This followed a $67M provision in Q4, which at the time brought total oil and gas loss reserves to $815M (vs. a portfolio with book value of $44B).
- In addition, the bank said it could need to add another $1.5B to reserves should oil hang around $25 per barrel over the next 18 months. For perspective, prior to Q4, JPMorgan hadn't had to add to reserves for six years - in fact reserve releases were a big boost to profits across the industry.
- "When the biggest bank increases reserves for potential oil losses it sets a tone for the industry,” says Mike Mayo.
- Separately, the FDIC says bad loan provisions across the banking sector were $3.8B higher in Q4 than a year earlier.
- JPMorgan (JPM -3.5%), Citigroup (C -2.9%), Bank of America (BAC -2.9%), Wells Fargo (WFC -2%), U.S. Bancorp (USB -3%), Regions Financial (RF -3.8%), Comerica (CMA -4.2%), Zions (ZION -4.1%), PNC Financial (PNC -2%).
- ETFs: KRE, KBE, IAT, KBWB, QABA, KBWR, KRU, KRS
Tue, Feb. 23, 9:01 AM
- Leading off the bank's investor day, CEO Jamie Dimon says the manufacturing sector is skewing American sentiment - while weak, it accounts for just 12% of the economy, but 60% of the S&P 500.
- The consumer is in a good spot, says Dimon, noting the consumer debt-to-servicing ratio is at its lowest level in 35 years.
- As for trouble in China, Dimon is taking the long view, with the likely outcome, he says, being that it's a developed country in 20 years. "That's the game we are playing."
- On the fintech boom: "This has been going on my whole life ... it's just a bit faster."
- Following Dimon, CFO Marianne Lake says JPMorgan (NYSE:JPM) - in a stress scenario where oil stays at $25 for 18 months - will need to take another $1.5B in reserves. "It's not our expectation," she adds, but the bank wants to give an idea of what could happen if things in the oil patch stay like they are.
- Webcast and presentation slides
Mon, Feb. 22, 12:22 PM
- Near the top of the list of investor concern, writes David Henry: How can JPMorgan (JPM +1.4%) squeeze costs without squeezing the top line?
- This year is expected to be the first in several in which the bank will not be announcing new cost-cutting targets as it's only halfway through an earlier plan to shave $4.8B in expenses. Most peers, on the other hand, have been talking about expanded cost-cutting efforts.
- "This is the sort of environment that Jamie Dimon and JPMorgan live for," says CLSA's Mike Mayo. "Sluggishness in the environment, competitors feeling pain,"
- Others worry the bank will have to lower its profit target again. It's currently a 15% ROE over the long-term, down from 16% hoped for back in 2013. The lender provided ROE of 13% in 2014 and 2015. "How can they get [to 15%] without higher interest rates," asks KBW's Chris Mutascio.
Thu, Feb. 18, 9:08 AM
- Just at Goldman Sachs (NYSE:GS), employees have taken $400M in paper losses on their restricted stock paid out as bonus last year, according to the WSJ.
- JPMorgan (NYSE:JPM), BofA (NYSE:BAC), Citigroup (NYSE:C), and Morgan Stanley (NYSE:MS) haven't yet reported 2015 stock grants, but their share prices have been similarly hit.
- Should slumping stock prices persist, it could add to the leakage of talent from Wall Street to tech and other industries, as bankers will be leaving a lot less money on the table.
- The issue is a test for new Dodd-Frank rules which forced banks to tailor incentive packages towards rewarding long-term health, rather than short-term profits. The result: Banks are now more likely to award restricted shares which don't vest for several years.
Tue, Feb. 16, 11:07 AM
- Former Goldmanite and TARP czar, and now Minneapolis Fed President, Neil Kashkari says the time is right for Congress to go further than Dodd-Frank "with bold, transformational solutions to solve [too big to fail] once and for all."
- Lawmakers, he says, should break up the largest banks into "smaller, less connected, less important entities." Other options would be turning the large lenders into public utilities by forcing them to hold so much capital that they can't fail, or taxing leverage throughout the financial system.
- Watching with interest: BAC, C, JPM, WFC, MS, GS
Fri, Feb. 12, 6:48 PM
- Jamie Dimon's purchase yesterday of 500K shares, or $26.6M worth, of JPMorgan Chase (NYSE:JPM) propelled the stock to an 8.2% jump and was taken as a big vote of confidence that the YTD selling of JPM - and perhaps bank stocks in general - has been overdone.
- "If you look at what Jamie Dimon did, certainly that has to imply some confidence" in the banking sector, says Brent Schutte, chief investment strategist of Northwestern Mutual Life’s wealth management unit.
- Barron's Teresa Rivas thinks JPM shares still look cheap below $60, and just 8.4x next year’s earnings and 0.9x book value, given that the bank is still expected to eke out earnings growth this year and return to high-single-digit Y/Y EPS growth in 2017 and beyond.
- But Deutsche Bank analysts say investors should not blindly follow Dimon's move, saying the purchase of his own bank's shares is roughly equivalent to an average 59-year old spending ~$4K of his or her own net worth in his employer; they say Dimon’s deal is equivalent to ~3% of his net worth - “Still, it is a whole year’s pay, not to be sniffed at.”
Thu, Feb. 11, 5:10 PM| Thu, Feb. 11, 5:10 PM | 33 Comments
Thu, Feb. 11, 2:37 PM
- Oil's lower by 3.3% today, but it's the financial sector (XLE -3.1%) again leading the S&P 500's 2.15% decline.
- For the year, the XLF is down by 17.9%, easily outpacing on the downside energy (down 13%) and the S&P 500 (down 11%).
- With the 10-year yield plunging all the way to 1.6% and short-term rates markets now beginning to price in Fed rate cuts this year, the banks are being hit particularly hard: Bank of America (BAC -8.1%), Citigroup (C -7.6%), JPMorgan (JPM -5.1%), Wells Fargo (WFC -2.9%), Goldman Sachs (GS -5.4%).
- Leading regionals (KRE -4.4%) lower are KeyCorp (KEY -5.9%), Huntington Bancshares (HBAN -4.9%), Fifth Third (FITB -5.4%), and PNC Financial (PNC -4.4%).
- ETFs: XLF, FAS, FAZ, KRE, UYG, VFH, KBE, IYF, BTO, IAT, IYG, SEF, FNCL, FXO, KBWB, QABA, RYF, FINU, KBWR, KRU, RWW, FINZ, KRS, XLFS
- Previously: Lots of negative rate talk at Yellen hearing (Feb. 11)
- Previously: Insurers punished as rates plunge (Feb. 11)
Tue, Feb. 9, 12:26 PM
- Markit (MRKT -0.8%) has acquired systems integration software developed by JPMorgan (NYSE:JPM) for an undisclosed sum. The company will "make the software available to sellside and buyside institutions seeking to integrate with major systems used in the syndicated loan market, including agent-servicing platforms and Markit's trade settlement services."
- Customer deployments are expected to start in 2H16. Markit doesn't expect the purchase to have a material impact on 2016 results.
- Markit exec Scott Kostyra: "Acquiring this software allows Markit to provide the global syndicated loan market with a proven solution for integrating with the newest technology for straight through processing of loan transactions and lifecycle events. We are offering an alternative to expensive and risky internal software builds and helping expedite industry adoption of risk and cost reducing initiatives such as Markit Clear for trade settlement and FpML for electronic communication of loan information."
Wed, Feb. 3, 11:03 AM
- The portfolio consists mostly of interest-rate swaps, reports Bloomberg, which would mean they're likely less risky and capital consumptive than equity or credit derivatives.
- The move, however, is part of Barclays' (BCS -2.5%) larger plan to speed exits of assets with high capital requirements. The size of the portfolio wasn't disclosed, but derivatives make up half of the risk-weighted assets in the bank's non-core unit.
- "Integrating this portfolio into our own business reiterates our commitment to the broader fixed-income markets and creates the opportunity for us to work with a wider range of clients over the long-term,” says JPMorgan (JPM -2.2%), which has a large derivatives portfolio giving it the chance to offset new positions with old, thus reducing the capital impact.
Wed, Feb. 3, 10:25 AM
- This just in: The financial sector is having a worse go it this year than energy, with the XLF lower by 13.6% YTD vs. the XLE's 9% decline.
- Leading a big reversal from this morning higher open is the XLF's 2% decline. The S&P 500 is now off 1%, and the XLE "just" 0.85%.
- Among the issues for the financials are two items: 1) Hopes for a sustained rate hike cycle have been dashed, with the 10-year yield tumbling all the way to 1.82% currently from about 2.30% when the Fed hiked in mid-December. Fed speakers are all-of-a-sudden sounding very dovish (Dudley is the latest), and short-term rate futures are now pricing in just a 50% chance of even one Fed rate increase this year; 2) For lenders specifically, there's worry over their exposure to the crashing energy sector. No doubt better capitalized today than 10 years ago, losses are still losses even if they don't threaten the viability of the bank.
- JPMorgan (JPM -2.6%), Wells Fargo (WFC -3.6%), Morgan Stanley (MS -3.5%), KeyCorp (KEY -3.1%), PNC Financial (PNC -2%), Comerica (CMA -2.7%), Schwab (SCHW -3.8%), MetLife (MET -2.5%)
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, BTO, IAT, SEF, IYG, FXO, FNCL, KBWB, FINU, QABA, KRU, KBWR, RWW, RYF, PSCF, FINZ, KRS, XLFS
Mon, Feb. 1, 12:19 PM
- JPMorgan (JPM -1.3%) agrees to pay more than $900M for a portfolio of personal loans made by LendingClub (LC +0.4%) and currently owned by Santander Consumer (SC -3.3%), reports the WSJ. The average credit scores of the consumers who took out the loans is about 700, and the portfolio sold for a premium to the unpaid balance.
- The sale and premium is notable given Santander Consumer (SC -3.3%) last week sent a shudder through the market after taking a writedown on some of its held-for-sale personal loan portfolio.
- Previously: Santander Consumer nears sale of $1B of consumer loans (Jan. 28)
- Previously: Santander Consumer plunges after Q4 results (Jan. 27)
Sun, Jan. 31, 8:53 AM
- Barron’s says it’s a good time to bet on the big banks after a rocky start to the year.
- The 10 biggest U.S. banks are trading for 8x-12x 2016 estimated earnings; the S&P 500 trades at 16x.
- Exposure to distressed U.S. energy companies is manageable.
- While leading Democratic presidential candidates are pushing for a breakup of the biggest banks, that possible eventuality could be a positive since many trade below their sum-of-parts.
- The following banks all have 20% upside: Bank of America (NYSE:BAC), Citigroup (NYSE:C), JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), Goldman Sachs (NYSE:GS), Morgan Stanley (NYSE:MS), BB&T (NYSE:BBT), PNC (NYSE:PNC), Suntrust (NYSE:STI), U.S. Bancorp (NYSE:USB).
Barron’s also mentions Citizens Financial (NYSE:CFG) and Region’s Financial (NYSE:RF) favorably.
Fri, Jan. 29, 9:22 AM
- "The market is clearly saying that Citigroup (NYSE:C) is worth far more dead than alive," says fund manager Colin McWey, an owner of the stock, but scratching his head at its valuation of just two-thirds of tangible book value.
- JPMorgan (NYSE:JPM) and PNC Financial (NYSE:PNC) trade for right around book value.
- Bank valuations are so cheap right now, says Morningstar's Jim Sinegal, that not a lot has to go right for an investor to make money.
- What about energy? Is it the new subprime? First off, writes Michael Brush, exposure isn't that high. At JPMorgan, it's about 1.6% of total loans; at Citi it's 3.3%. Energy loans make up just 1.8% of total loans at the roughly 15 lenders in Baird analyst David George's coverage universe vs. 25% exposure to housing sector debt. George: Most banks could write off all energy loans and still not post a loss.
- ETFs: XLF, FAS, FAZ, UYG, KRE, VFH, KBE, IYF, BTO, IAT, SEF, IYG, FXO, FNCL, KBWB, FINU, QABA, KRU, KBWR, RWW, RYF, FINZ, KRS, XLFS
Chase Manhattan Corporation is a leading financial services company which provides banking services, including commercial and consumer financing, investment banking, trust and capital markets trading, to customers worldwide. The corporation is a global bank with a diversified domestic base... More
Industry: Money Center Banks
Country: United States
Other News & PR