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. 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. 9, 2013, 12:23 PM
- Bullish on the economy, Goldman's David Kostin says investors should favor those firms with high fixed costs as they'll benefit most from margin expansion. This leads him to pick industrials (XLI) and financials (XLF) as his favorite sectors.
- Industrials ETFs: FXR, IYJ, PRN, XLI, VIS, RGI, PSCI, UXI, SIJ.
- Financials ETFs: XLF, IYF, PFI, VFH, RYF, RWW, FAS, UYG, FAZ, SKF, SEF, IAI, FXO, PSCF, KBWD, KBWB, IYG, FINU, FINZ.
- Goldman's got a basket of 50 names set to benefit most from stronger GDP growth. Included are ANF, WFM, APC, R, X. More names as we get them.
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."
- Financial ETFs: XLF, IYF, PFI, VFH, RYF, RWW, FAS, UYG, FAZ, SKF, SEF, IAI, FXO, PSCF, KBWD, KBWB, IYG, FINU, FINZ.
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.
- Source: Press release.
- 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. 16, 2013, 11:37 AM
- The Fed approves a final rule requiring 70 financial companies to pony up $440M annually for the cost of expanded central bank supervision.
- The Dodd-Frank act not only mandated new regulatory oversight of banks, it required the banks to pay for the expansion. The assessment applies only to those companies with more than $50B in assets.
- Relevant ETFs: XLF, IYF, PFI, VFH, RYF, RWW, FAS, UYG, FAZ, SKF, SEF, IAI, FXO, PSCF, KBWD, KBWB, IYG, FINU, FINZ.
Jul. 24, 2013, 1:29 PMUtilities (XLU -1.7%) lead the way lower today as interest rates shoot higher. Also taking a hit are basic materials (XLB -1.2%) and energy (XLE -1.5%) as most commodities, including oil (USO -1.8%), are lit up bright red. Bank of America, AIG, and Berkshire Hathaway are among the financial sector (XLF -0.6%) stocks taking a breather after big runs for most. | Jul. 24, 2013, 1:29 PM | Comment!
Jul. 18, 2013, 11:36 AMThe 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 | Comment!
Jul. 17, 2013, 1:37 PMFinancial sector (XLF) prospects are more promising today than they've been for a few years, writes Fidelity's Chris Lee, noting repaired balance sheets, contained expenses, and the housing upturn. Toss in rising interest rates and the potential for accelerating capital returns. Priced in? No, he says, as valuations remain attractive. Offsetting the positive are regulatory concerns, the effect from the end of QE, and a re-bubbling up of EU troubles. | Jul. 17, 2013, 1:37 PM | 1 Comment
Jul. 12, 2013, 4:31 AMDemocratic Senator Elizabeth Warren, Republican counterpart John McCain and two others have introduced the "21st Century Glass-Steagall Act," a reprise of the 1930s law that was repealed in 1999 and that separated traditional banking such as home loans and checking accounts from riskier pursuits like investment banking and trading derivatives. Slogans such as "banking should be boring" and keep "keep the gamblers out of our banks" have a populist ring, but the legislation will face many hurdles. | Jul. 12, 2013, 4:31 AM | 74 Comments
Jul. 9, 2013, 4:25 PMHeading into an earnings season looking like a repeat to Q1's sluggish performance, financials (XLF) look most attractive, says BAML, but the materials sector (XLB) is to be avoided. Noted is the unusual level of zipped lips in the corporate world in June - "generally worrisome," says BAML, but managements were mum the last two quarters as well, and earnings ended up beating expectations. | Jul. 9, 2013, 4:25 PM | Comment!
Jul. 9, 2013, 7:32 AMSo much for late fees as a profit center. The credit card delinquency rate fell to 2.41% at the end of Q1 from 2.47% three months earlier - it's the lowest rate since 1990 and far below the 15-year average of 3.87%. Can the rate decline further? An improving economy is likely to induce banks (XLF) to lend to riskier borrowers and consumers to take on additional debt as evidenced in yesterday's consumer credit report. | Jul. 9, 2013, 7:32 AM | Comment!
Jul. 8, 2013, 4:30 PMThe new FDIC leverage rule for banks is reportedly going to be 5%, reports CNBC, well-above Basel's 3% requirement, but below the 6% floated over the past few weeks. Once the rule is proposed, it is then put out for comment and regulators might later adjust as necessary. The new requirement is expected to be a nonevent for the banks - many of which are already at that level and others which shouldn't have a problem tweaking things to get there. | Jul. 8, 2013, 4:30 PM | 1 Comment
Jul. 6, 2013, 3:34 PM"With no recession in sight, we find it hard to make a bear case," says HSBC, noting that "the first tightening in a cycle … typically causes only a short-lived correction in stocks." The bank's global head of equity strategy Garry Evans says the combination of a "data dependent" taper, 10% earnings growth, and relatively conservative valuations makes for some attractive opportunities especially in financial stocks (XLF) which he says are cheap and poised for strong earnings momentum. HSBC also prefers U.S. equities (SPY, VTI) to other markets. | Jul. 6, 2013, 3:34 PM | 21 Comments
Jul. 2, 2013, 4:23 PMThe FDIC will introduce a draft of leverage limits for the big banks (XLF) on July 9. It's expected these could be as much as double (to 6%) what's required by Basel III, but it's also expected many large U.S. lenders are already above that level and the ones below shouldn't have an issue reaching it. 6% is also an upper limit - chances are the level comes in somewhere between 3-6%. | Jul. 2, 2013, 4:23 PM | Comment!
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