Oct. 14, 2013, 11:53 AM
- The big winners from the JPMorgan and Wells Fargo earnings reports were Goldman Sachs (GS -1.3%) and Morgan Stanley (MS -0.6%), according to UBS' Brennan Hawken. Both closed nicely higher Friday, far outperforming the reporting banks, as well as Citigroup and Bank of America.
- Hawken points to detail buried in JPMorgan's report: Investment banker pay fell 15% Y/Y as investment bank revenue declined just 2%. This brought the compensation to revenue ratio down to 28% - the lowest for any quarter in two years.
- Not nearly as affected by the mortgage and consumer lending slowdown as the money center banks, Goldman and Morgan Stanley (the shareholders, not the employees) should benefit from the leeway to reduce costs.
Oct. 9, 2013, 12:54 PM
- The bank values the unit at $3.3B, reports the WSJ, and is telling prospective buyers it generates $750M in annual income before compensation costs (figure about $375M for compensation).
- JPMorgan (JPM) announced in July its plans to exit the physical commodities business, which it calls "Newco," and separates into four different divisions - North American power, North American natural gas, European power and gas, base metals, coal, and the Henry Bath Metals warehousing network.
- The 90-page sales book makes no mention of senior bank commodity executives Blythe Masters and Paul Posoli as being available to come along as part of the deal.
- Morgan Stanley (MS +0.9%) has put the sale of its commodity business on hold as it awaits Fed regulatory decisions. Goldman (GS +0.8%) also put the sale of Metro International Trade on hold.
Oct. 8, 2013, 7:23 AM
Oct. 2, 2013, 4:50 AM
- The Federal Reserve has reportedly expanded its inquiry of banks' physical commodities activities to include those of Goldman Sachs (GS) and Morgan Stanely (MS), adding to reviews of Citigroup and JPMorgan.
- The Fed is looking at the legal and regulatory exemptions that enable the firms to operate in the commodities markets. The scrutiny comes amid accusations that GS and JPM manipulated prices in the aluminum and electricity markets respectively.
- However, the U.S. Chamber of Commerce, as well as Boeing, UPS and other companies, yesterday said that forcing banks out of commodities would cause them difficulties.
Sep. 30, 2013, 3:48 AM
- Analysts have cut their earnings estimates for the top five U.S. banks by over $1B in total, due to increasing fears about a sharp fall in trading revenue - especially from fixed-income operations - and higher legal costs.
- JPMorgan (JPM) has been particularly affected, with consensus for net income down $526M to below $5B. The company's legal woes are seen adding $2B to expenses.
- Analysts have lowered their net income for Bank of America (BAC) by $128M, for Goldman Sachs (GS) by $123M, for Morgan Stanley (MS) by $97M, and for Citigroup (C) by $210M. The latter has already reportedly told investors about a sharp drop in trading revenues.
- Banks had hoped a big September would help offset a slow summer, but that hasn't happened.
Sep. 27, 2013, 12:26 PM
- Calling the trading decline facing the big banks "a full-scale rout," Sanford's Brad Hintz cuts his Goldman Sachs (GS -1.3%) Q3 EPS estimate 15% to $2.62, and Morgan Stanley's (MS -0.4%) 20% to $0.41. Q3 is typically soft, he notes, but this year is something more and fixed-income trading could decline 20-25%.
- Analysts are busy cutting estimates after several management warnings and the weak results from already-reported Jefferies.
- Earlier: Guggenheim's Marty Mosby downgrades Goldman and BofA for similar reasons (tossing in mortgage banking softness as well).
- A few more cuts and the banks can report a big Q3 whiff next month and still be able to trade higher.
Sep. 24, 2013, 1:23 PM
- 'Morgan Stanley, Morgan Stanley, and Morgan Stanley" are Mike Mayo's top 3 picks among the banks. MS is double over the last year and it's a double again over the next three, he says.
- Of the dip in trading revenue report from Citi which hit the banks yesterday, Mayo says it's old news - fixed income trading has been going down for years and a continued fall is already in Mayo's models. Any revisions lower are little more than "noise," and will be a blip on the screen a few months from now. Morgan Stanley gets just 15% of revenue from fixed-income trading - sluggishness in this area is no excuse not to own the stock, says Mayo.
- "Revenues stink in the banking industry," he allows, and that's why he likes Morgan Stanley (and Citigroup C as well) - "the restructuring story can cut through the revenue weakness."
- What about Bank of America (BAC) which has moved nearly tick for tick with Morgan Stanley this year? Morgan has more levers, says Mayo, particularly in Wealth Management after its purchase of Smith Barney from Citigroup.
Sep. 23, 2013, 7:36 AM
- Citigroup (C) slips 1% in the premarket after its weekend "pre-announcement" of a big fall in FICC revenue in Q3. The bank had been hoping to get bailed out by a big September, but the Fed's non-taper last week squelched the chance of major portfolio moves by clients.
- Anybody paying attention surely noticed last week's evaporation of profit at Jefferies (now owned by Leucadia) as fixed-income trading revenue essentially disappeared.
- Deutshce Bank (DB) is expected to soon be out with a warning similar to Citibank's. Barclays (BCS) and Credit Suisse (CS) have already waved their own red flags over this issue.
- Not yet heard from are Goldman (GS), Morgan Stanley (MS), JPMorgan (JPM), and BofA (BAC), but Goldman is also off nearly 1% premarket.
Sep. 18, 2013, 1:03 PM
- "This is a core, strategic business for us," says Lloyd Blankfein of Goldman Sachs' (GS -0.7%) commodity operations, making a forceful public commitment to the unit as regulators scheme force the bank out, and some competitors willfully exit.
- The Fed is expected to decide shortly whether Goldman and Morgan Stanley (MS) should continue to be allowed to broadly trade physical commodities and invest in infrastructure assets. Being in physical commodities was "grandfathered in" when Goldman became a bank holding company in 2008, says Blankfein, by dint of the bank being involved in the business for more than 100 years. Blankfein got his start in Goldman's J Aron commodity unit.
- Earlier from Blankfein.
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, 10:11 AM
Sep. 11, 2013, 7:35 AM
- Morgan Stanley's (MS) deposits will swell to $138B in mid-2015 from $82B now, thanks to its takeover of Smith Barney from Citigroup, said CFO Ruth Porat, speaking at Barclays yesterday (presentation slides). The bank plans to use the cash to aggressively expand its business lending to clients, and the ratio of loans to deposits should climb to 70% in 2015 from 55% now. Over time, says Porat, it could rise to 90%.
- This lending is a key part of CEO James Gorman's strategy to wean the bank off of trading income.
- The deposits will vault Morgan past regional players like BB&T and SunTrust into the top-10 of the nation's largest banks.
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. 6, 2013, 12:13 PM
- "The probability of it happening again in our lifetime is as close to zero as I could imagine," Morgan Stanley (MS +0.8%) CEO James Gorman tells Charlie Rose in what hopefully won't be added to the list of ill-timed boners from captains of industry.
- He cites different management at financial firms, higher capital ratios, and changes int he business mix - "it's dramatic." Among Morgan Stanley's own steps is the purchase of Smith Barney from Citigroup in the hope of a steady stream of fee business.
- "The largest financial institutions in the U.S. are as healthy now as they have ever been."
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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, 2:56 PM
- The suit against MS by the National Credit Union Administration is over the sale of $566M in RMBS whose losses contributed to the failure of two credit unions, according to the complaint.
- Originators "systematically abandoned the stated underwriting guidelines in the offering documents," says the NCUA in a statement.
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Industry: Investment Brokerage - National
Country: United States
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