Sep. 25, 2013, 9:43 AM
- Speaking at BAML's Banking and Insurance Conference in London, Deutsche Bank (DB -1.6%) co-CEO says the bank expects a "significant" drop in Q3 trading revenue.
- The announcement isn't unexpected, and follows a similar warning from Citigroup over the weekend, numerous other rumblings from investor conferences this month, and Jefferies' already reported ugly (from a trading standpoint) Q3.
- Previous: FICC trading revenue has been slipping for years and should be in analyst models by this point.
- Banks (KRE -0.6%), (KBE -0.4%) again are leading the market decline.
- Financials ETFs: XLF, IYF, PFI, VFH, RYF, RWW, FAS, UYG, FAZ, SKF, SEF, IAI, FXO, PSCF, KBWD, KBWB, IYG, FINU, FINZ.
Sep. 23, 2013, 10:23 AM
- The financial sector (XLF -1.2%) leads the market lower following Citigroup's warning about Q3 trading revenues. SPDR KBW Bank ETF (KBE -1.3%). Not necessarily exposed to trading activity, regional banks are nevertheless not spared, the Regional Banking ETF (KRE -1.3%). The TBTF banks are all off between 2 and 3 percent.
- Related ETFs: XLF, IYF, PFI, VFH, RYF, RWW, FAS, UYG, FAZ, SKF, SEF, IAI, FXO, PSCF, KBWD, KBWB, IYG, FINU, FINZ, KBWB, IAT, KBE, KRE, RKH, QABA, KRU, KRS, KBWR.
Sep. 19, 2013, 3:05 PM
- Regional banks have fallen and can't get up following yesterday afternoon's non-taper announcement. The SPDR Regional Banking ETF (KRE -1.7%) is off about 3% from where it stood prior to 2 PM ET yesterday.
- The sector sliced right through the bond market tumble this summer as higher rates were expected to boost profitability for the lenders, and investors are using the excuse of the taper delay to cash in some chips (as they are with another higher-rate beneficiary, the insurance sector).
- Individual names of note: Huntington (HBAN -2%), Regions (RF -3.7%), SunTrust (STI -3.1%), First NIagara (FNFG -2.8%), Synovus (SNV -1.8%), KeyCorp (KEY -3.9%), ZIons (ZION -3.1%), Flagstar (FBC -2.3%).
- Perhaps a little less asset-sensitive and performing better: U.S. Bancorp (USB -0.4%), BB&T (BBT -0.3%), PNC Financial (PNC -0.5%), Hudson CIty (HCBK -0.9%), Fifth Third (FITB -1%).
- Other ETFs: KBE, KBWB.
Sep. 16, 2013, 2:18 PM
- Bank of America's (BAC +0.7%) Tier 1 common capital ratio would remain above the regulatory minimum, falling to 9.2% by mid-2015 in the "severely adverse scenario" of its self-administered stress test, which - like Citigroup and Goldman - models for a number of Armageddon-like scenarios with the exception of one: sharply higher interest rates. Is the Fed really that omnipotent?
- The Fed's own stress test results - the CCARs - are due in March of next year.
- BofA's Mid-Cycle Stress Test Results.
- Earlier: Citigroup and Goldman.
- More: Keycorp (KEY) says it will come in at 10%, Capital One (COF) at 12.5%.
- ETFs of interest: KBE, KBWB, KRE, KCE, KBWC, XLF, IYF, PFI, VFH, RYF, RWW, FAS, UYG, FAZ, SKF, SEF, IAI, FXO, PSCF, KBWD, KBWB, IYG, FINU, FINZ.
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. 11, 2013, 8:23 AM
- Stung in one area of their business by rising rates as refinance business evaporates, regional banks are overall pleased with the steeper yield curve. Presenting at various conferences yesterday, players like FITB, BBT, MTB, and RF say they can now reinvest money at those higher rates.
- Fifth Third transcript and presentation slides.
- "Our forecast doesn't show short rates moving until at least the latter part of 2014 and probably into 2015," says Regions CFO David Turner (presentation slides). "We do benefit from the steepening of the curve."
- ETFs: KRE, KBE, KBWB.
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. 10, 2013, 3:38 PM
- U.S. Bancorp (USB +1%) is among those making significant accounting changes - moving bonds from the "available-for-sale" bin into "held-to-maturity." The move gives lenders near-term capital relief, but forces them to hold onto the paper no matter what.
- U.S. Bancorp's held-to-maturity portfolio ballooned to $34.7B or 46% of its investment portfolio in Q2, up from just $1.5B in 2010. The bank did it to cope with new capital regulations, but is now stuck with billions in low-yielding assets as rates begin to rise - the weighted-average yield on the held-to-maturity portfolio is just 1.89% compared to 2.72% in the available-for-sale portfolio.
- Texas bank Cullen Frost (CFR +0.2%) was forced to do likewise as regulators seemed "incapable" of removing a requirement to subtract paper losses on securities from capital ratios, according to the bank finance chief. "That was absolutely ridiculous for a bank like ours," which never had any funding issues, says CIO Bill Sirakos.
- The bottom line: The banks made their arrangements with the federales a long time ago. They're just going to have to deal with it.
- Financial ETFs: XLF, IYF, PFI, VFH, RYF, RWW, FAS, UYG, FAZ, SKF, SEF, IAI, FXO, PSCF, KBWD, KBWB, IYG, FINU, FINZ, KBE.
Sep. 3, 2013, 3:16 PM
- The template (see it here) is meant to guide banks with between $50B and $100B in nonbank assets - think U.S. Bancorp (USB), SunTrust (STI), and foreign banks with limited U.S. operations.
- These smaller, less complex firms - not systemically important - can use the 27-page template to write resolution plans focusing on nonbank operations and their connection to banking operations. The form is expected to simplify a process that could be quite complicated and costly for the relatively-smallish lenders.
- Among the larger banks (more than $100B in nonbank assets), 4 filed an initial version of their plans this summer. Eleven are approaching the October 1 deadline for a 2nd version.
- Regional bank ETFs: IAT, KBE, KRE, RKH, QABA, KRU, KRS, KBWR.
Aug. 23, 2013, 12:17 PM
- While the possibility of breaking up JPM is quite low, there exists substantial upside for investors should it occur, says KBW's Chris Mutascio. The businesses - traditional banking, asset management, and private equity - are together worth $255.7B, he estimates, versus the current $197B market cap.
- Getting back to reality, Mutascio turns his focus on the ever-increasing scope of lawsuits and investigations facing the bank. While the costs from these are potentially "high and uncertain," the bank can "easily earn through them."
- The investigatory toll on JPMorgan is seen in the stock's underperformance against a broader bank index (KBE) of late, but rather than buying other banks on the hope short-term rates (and net interest margins) will rise, why not buy JPM shares at a discount and wait for the litigation storm to pass, says Mutascio.
Aug. 19, 2013, 11:17 AM
- A new round of Fed stress tests found all 18 participating banks need to improve their capital planning.
- The 2014 CCAR process - in which banks will submit their capital return plans for Fed approval - begins this fall. In addition to last year's 18 participants will be another 12 firms with at least $50B in assets.
- Full study.
- Related ETFs: KBE, XLF, IYF, PFI, VFH, RYF, RWW, FAS, UYG, FAZ, SKF, SEF, IAI, FXO, PSCF, KBWD, KBWB, IYG, FINU, FINZ.
Aug. 15, 2013, 3:45 PM
- Is it something more than interest rates at work? Selloffs earlier this summer were notable for exempting certain sectors set to benefit from higher rates - insurance (KIE -1.4%) and regional banks (KRE -1.1%) - but not today.
- Leading the insurance sector lower are AIG (AIG -2.3%), Aflac (AFL -2%), Cincinnati Financial (CINF -2.3%), Old Republic (ORI -1.3%), and Prudential (PRU -1.6%).
- In regional banks it's Huntington (HBAN -1.5%), SunTrust (STI -1.5%), First Niagara (FNFG -1.6%), Synovus (SNV -1%), and KeyCorp (KEY -1.5%), and Flagstar (FBC -4%).
- Related ETFs: IAT, KBE, KRE, RKH, QABA, KRU, KRS, KBWR.
Aug. 13, 2013, 11:03 AM
- BMO Capital's Lana Chan plugs Fed rate hikes into her models and raises price targets on eight regional banks. Her assumptions are rate hikes beginning in mid-2015 and totaling 100 bps by the end of the year, with another 100 bps of hikes by the middle of 2016 - a total off 200 basis points over one year.
- Hold-rated BB&T (BBT +0.3%) is upped to $40 from $38, Comerica (CMA -0.2%) to $42 from $41, PNC Financial (PNC -0.7%) to $78 from $76, SunTrust (STI -0.3%) to $36 from $35, U.S. Bancorp (USB -0.4%) to $39 from $38, and Wells Fargo (WFC -0.1%) to $47 from $46.
- M&T Bank (MTB -0.7%) - still awaiting approval of its buyout of Hudson City Bancorp (HCBK -0.6%) - is lifted to $124 from $117.
- Buy-rated Fifth Third (FITB -1.3%) with price target $22, KeyCorp (KEY -0.4%) with price target $14, and Zions (ZION -1.7%) with price target $33 receive no boost, but Regions Financial (RF -0.1%) is lifted to $13 from $12.
- Many banks disclose their own analysis - but these (probably like Chan's) assume a "parallel" increase in rates in which the yield curve shape doesn't change. By their own analysis, Zions see itself benefitting more than its competitors, with net interest income to rise 18.1% on a 200 bp parallel increase in rates.
- Regional bank ETFs: IAT, KBE, KRE, RKH, QABA, KRU, KRS, KBWR.
Jul. 18, 2013, 11:36 AM
The financial sector (XLF +1.2%) is leading a moderate rally in the S&P 500 (SPY +0.7%) and DJIA (DIA +0.8%) as Intel, Verizon, and Qualcomm hold back the Nasdaq (QQQ +0.1%). Within financials, it's the banks (KBE +1.8%) doing the best. Morgan Stanley is ahead 5% as it surprises with a buyback announcement, and Bank of America gains another 3% following yesterday's earnings.| Jul. 18, 2013, 11:36 AM
Jul. 10, 2013, 1:22 PM
If you've got to buy a bank, says KBW's Chris Mutascio, make it JPMorgan (JPM) for its relative undervaluation, but the banking sector (KBE -1.4%) overall is overvalued. The recent run-up in regional shares (KRE -1.2%) on the belief they stand to benefit most from higher rates is particularly misguided, he says. Banks are far more levered to short rates which haven't budged. Bullet-proof of late, regionals are being sold today: Huntington (HBAN -3.1%), New York Community (NYCB -1.1%), BB&T (BBT -1.1%), PNC Financial (PNC -2.8%), First Niagara (FNFG -2.5%), Synovus (SNV -3.4%), People's (PBCT -1.6%), Comerica (CMA -2.7%), U.S. Bancorp (USB -1%).| Jul. 10, 2013, 1:22 PM | 3 Comments
Jul. 10, 2013, 11:25 AM
Bank stocks (KBE) - beating the S&P by nearly 1000 bps over the last quarter - have gotten ahead of themselves says FBR (Paul Miller), noting mid-cap lenders (KRE) trade at 1.8x book and 14.8x 2014 earnings despite lame loan growth and margin compression. This doesn't mean the team doesn't have picks: PNC, Signature Bank (SBNY), and Customers Bancorp (CUBI) are dealing with macro pressures by stealing market share, and Flagstar (FBC) is a credit recovery play (see also).| Jul. 10, 2013, 11:25 AM
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