Dec. 10, 2013, 11:53 AM
- Not letting the poor weather affect their meetings (or perhaps they were conducted by teleconference), the FDIC and the Fed vote to approve the Volcker rule which is designed to ban prop trading by banks. The CFTC postponed its vote due to the snow.
- The CFTC's Bart Chilton - previously a critic of the rule for not being tough enough - has dropped his opposition, saying the final version closes loopholes and tries to end speculative trading dressed up as hedging (we'll call it the London Whale amendment).
- On the other hand, the final document is 882 pages and compliance has been delayed for a year until July 2015 ... loopholes meet trucks.
- Related ETFs: FAS, XLF, FAZ, UYG, KRE, KBE, VFH, IYF, SEF, IAT, IYG, PFI, FXO, KBWB, RKH, QABA, RWW, KRU, FINU, KBWR, RYF, PSCF, FNCL, KRS, FINZ
Dec. 10, 2013, 3:33 AM
- A panoply of regulators are due to disclose the details of the Volcker rule this morning and then formally adopt the measures later in the day.
- The new regulations will ban banks from proprietary trading, and prevent them from owning over 3% of hedge funds and private-equity funds.
- Banks fear that the rules could cost them billions of dollars by making it more difficult to engage in activities that are permitted under the regulation, such as market-making, underwriting and hedging against risks. Expect the lawyers to go through the proposals to see what could be struck down in court.
- Tickers: C, JPM, MS, WFC, BAC, COF, GS, BK, USB
- ETFs: FAS, XLF, FAZ, UYG, KRE, KBE, VFH, IYF, SEF, IAT, IYG, PFI, FXO, KBWB, RKH, QABA, RWW, KRU, FINU, KBWR, RYF, PSCF, FNCL, KRS, FINZ
Dec. 4, 2013, 3:42 PM
- Trade idea #6 for 2014 from Goldman Sachs is a long position in large cap bank indexes in the U.S., Europe, and Japan. The ETF choice for the U.S. is KBE, while EUFN could work for Europe (better ETFs for European and Japanese banks trade in those markets).
- Faster growth and a steeper yield curve should boost U.S. banks, while those parts of the Japanese economy particularly levered to consumer spending - namely housing and banks - should see support. Europe should see growth of just 1%, but this would be a significant improvement over 2013.
- Goldman also notes bank valuations remain below pre-crisis levels and could see a boost as the overall risk-taking backdrop improves.
- Other relevant ETFs: FAS, XLF, FAZ, UYG, VFH, IYF, SEF, IYG, FXO, PFI, KBWB, RWW, FINU, RYF, PSCF, FNCL, FINZ, IAI
- Previous ideas are here
Dec. 3, 2013, 3:50 PM
- The CFTC sets a December 10 vote on the so-called Volcker rule which is supposed to ban banks from prop trading. It sounded so simple when politicians trumpeted it in 2010, but the reality of what banks do is slightly more complex and the text of the rule has mushroomed to 1K pages. GS, MS, JPM, BAC, and C, among others, will be eager to see what the regulations entail.
- Any hopes for a watering-down of the rule likely ended with JPMorgan's $6B London Whale loss.
- The SEC indicates it will act on the rule around the same time as the CFTC (3 other agencies must approve as well).
- Related ETFs: FAS, XLF, FAZ, UYG, VFH, IYF, SEF, IAI, IYG, PFI, FXO, KBWB, KCE, RWW, FINU, RYF, PSCF, FNCL, FINZ, KBWC
Nov. 27, 2013, 1:42 PM
- American Express (AXP +0.4%), Discover (DFS +0.3%), U.S. Bancorp (USB +0.2%), and Wells Fargo (WFC -0.1%) are best positioned to be allowed large capital returns (about 70%) after the Fed's early 2014 stress tests, says Credit Suisse's Moshe Orenbuch, while Ciitgroup (C +0.2%) and PNC Financial (PNC +0.9%) are likely to show the biggest improvement from last year.
- Overall, his team expects large cap bank capital returns to be 65% next year vs. about 48% in 2013. The median dividend payout ratio is expected at 22%, level with this year.
- Orenbuch notes the CCAR will be tougher this time around - notably by assuming a global, not just domestic meltdown, and assuming a significant reversal in the property market - with commercial real estate exposure particularly harshly judged.
- Balanced against that and likely winning, however, are far stronger capital positions of the banks, says Orenbuch.
- Financial and banking ETFs: FAS, XLF, FAZ, UYG, KRE, KBE, VFH, IYF, IPF, SEF, IAI, IAT, IYG, FXO, PFI, IXG, KBWB, RKH, QABA, KCE, FINU, RWW, KRU, RYF, KBWR, AXFN, PSCF, KRS, FNCL, FINZ, KBWX, KBWC
Nov. 27, 2013, 9:22 AM
- "Mortgage-related litigation has recently gotten a second wind and has expanded beyond investor claims,” says S&P, now estimating legal tab for U.S. banks could be another $56.5B-$104B. The good news is banks have gotten ahead of even these crazy numbers by boosting litigation reserves to nearly $155B.
- The bad news would be if Bank of America's (BAC) $8.5B mortgage settlement with private parties gets tossed out by a federal judge (see Article 77 hearing coverage), the litigation losses could "escalate significantly ... the ability of US banks with the largest exposures to withstand additional expenses is not unlimited.”
- C, WFC, MS, JPM, and GS declined to comment for the story.
- From the Department of Legal Issues Are Going Nowhere: The Federal Home Loan Bank of Pittsburgh - claiming its losses of more than $1B are not covered by the JPMorgan global settlement - asks a judge to force JPM to turn over the draft complain from the DOJ which includes the name of a bank employee described as a cooperating witness for the government.
- Related ETFs: FAS, XLF, FAZ, UYG, VFH, IYF, SEF, IAI, IYG, FXO, PFI, KBWB, KCE, FINU, RWW, RYF, PSCF, FNCL, FINZ, KBWC
Nov. 27, 2013, 3:41 AM
- Eight leading U.S. banks could have to pay a further $56.5-104B to settle mortgage-related claims, S&P reckons.
- However, the largest banks have estimated capital buffers of $155B combined, which would be enough to absorb the losses.
- S&P doesn't expect the legal liabilities to hurt the banks' ratings.
- Banks: JPM, BAC, C, MS, WFC, GS
- ETFs: FAS, XLF, FAZ, UYG, VFH, IYF, SEF, IYG, FXO, PFI, KBWB, RWW, FINU, RYF, PSCF, FNCL, FINZ
Nov. 20, 2013, 10:50 AM
- Open for trade is the Horizons S&P Financial Select Sector Covered Call ETF (HFIN), which aims for extra income by using covered-calls on stocks in the S&P Financial Select Sector Index (related ETF: XLF). The HFIN has an expense ratio of 0.7%.
- In other ETF news: ProShares updates paperwork on its Short Term USD Emerging Markets Bond ETF (EMSH), detailing an expense ratio of 0.5%. ALPS files to launch a Workplace Equality Fund (EQLT). "The ETF consists of approximately 140 stocks of U.S. and foreign companies that support equality for lesbian, gay, bisexual and transgender employees." The expense ratio will be 0.75%.
Nov. 18, 2013, 11:56 AM
- Led by a big move in the TBTFs, the Financial Sector SPDR (XLF +0.6%) hits its highest level since September 2008, though it remains far below the mid-2007 peak.
- Has the easy money been made? Drexel Hamilton's David Hilder notes Bank of America (BAC +1.5%), Citigroup (C +1.8%), and Morgan Stanley (MS +1.2%) all traded well below tangible book value one year ago, and Raymond James' Anthony Polini thinks the 10-year Treasury yield will have to move above 3% and stay there before you'll begin seeing earnings estimates ratcheted up.
- Bank of America hit its highest level in nearly 3 year today and JPMorgan (JPM +1.7%) - for all of its legal troubles - is only about 2% below prices not seen since 2000.
- The relatively clean Wells Fargo (WFC +0.3%) is the group laggard this session.
- Financial sector ETFs: FAS, XLF, FAZ, UYG, KRE, KBE, VFH, IYF, SEF, IAT, IAI, IYG, FXO, PFI, KBWB, RKH, QABA, KCE, RWW, FINU, RYF, KRU, KBWR, PSCF, KRS, FINZ, FNCL, KBWC
Nov. 18, 2013, 4:30 AM
- The Federal Reserve could delay by a year the date by which banks will have to comply with all aspects of the Volcker rule. The target at the moment is July 2014.
- Regulators are still finalizing the proposal, which, among other things, would ban banks from proprietary trading using their own money. The regulators are unlikely to release the definitive version until December.
- However, banks would still have to eliminate their pure proprietary trading desks by July next year.
- The sector is concerned that the rule will limit activities such as market making and hedging.
- ETFs: FAS, XLF, FAZ, UYG, VFH, IYF, SEF, IAI, IYG, FXO, PFI, KBWB, KCE, RWW, FINU, RYF, PSCF, FINZ, FNCL, KBWC
- Related tickers: BAC, GS, JPM, C, BK, WFC, MS
Nov. 15, 2013, 8:18 AM
- Paul Tudor Jones' Tudor Investment in Q3 greatly boosted its holdings in the Consumer Discretionary Select SPDR (XLY), purchasing 3.6M shares to bring the total owned to 4.1M. The firm also opened a 2.8M share holding in the iShares MSCI Emerging Markets ETF (EEM).
- No longer a part of the portfolio are the Financial SPDR (XLF), Industrial SPDR (XLI), and the Energy SPDR (XLE).
- It's probably not too financially healthy to read a ton into these moves, as the ETF holdings could be hedges against other positions as easily as outright bets.
- Q3 13-F
- Q2 13-F
Nov. 12, 2013, 3:31 PM
- The net closing of bank branches continues a mutliquarter trend, according to SNL Financial, which finds a net loss of 390 locations in Q3 as more customers do more routine banking business online, and banks - in a sluggish revenue environment - look to the low-hanging fruit of shuttering underperforming stores. The 390 figure is about inline with Q2, but higher than prior reads.
- "There's almost nobody in the branches," says bank consultant Jim Adkins. "You could shoot water balloons all over the place and not hit anybody."
- In addition to costs and technology, there's also M&A, and one of the first things to be done after an acquisition is to close overlapping branches.
- Leading the way in terms of net closings in Q3 were SunTrust (STI) and Bank of America (BAC). Not getting in the spirit of things is JPMorgan (JPM) which opened more branches than it closed in Q3.
- Related ETFs: FAS, XLF, FAZ, UYG, VFH, IYF, SEF, IYG, FXO, PFI, KBWB, RWW, FINU, RYF, PSCF, FINZ, FNCL
Nov. 8, 2013, 4:27 PM
Nov. 8, 2013, 10:41 AM
- Up sharply as interest rates fly higher (the 10-year is up 15 basis points to 2.75%) are the life insurers - all of whom have had their investment returns more than a little constrained by puny yields. IAK +2.4%
- MetLife (MET +5.9%), Prudential (PRU +4.5%), Lincoln National (LNC +6.8%), Hartford (HIG +3.1%).
- Also set to benefit from a steeper yield curve (if we're to believe their models) are the banks, and they're leading the S&P 500 higher. The TBTFs: Bank of America (BAC +3.3%), JPMorgan (JPM +3.1%), CItigroup (C +3.3%), Wells Fargo (WFC +2.6%). The regionals (KRE +3.4%): Huntington (HBAN +2.6%), Regions (RF +4.2%), PNC (PNC +2.8%), FIfth Third (FITB +3.4%), First Niagara (FNFG +2%), Keycorp (KEY +3.5%), Zions (ZION +4.1%), Comerica (CMA +3.1%).
- The XLF +1.9%.
- FInancial sector ETFs: FAS, XLF, FAZ, UYG, KRE, KBE, VFH, IYF, KIE, SEF, IAT, IAI, IYG, IAK, FXO, PFI, KBWB, RKH, QABA, RWW, FINU, RYF, KRU, KBWR, PSCF, KBWP, KBWI, KRS, FINZ, FNCL
Nov. 7, 2013, 2:04 PM
- How aggressive have banks been with loan price competition as they seek to add mortgages to their books, asks Redwood Trust (RWT +0.8%) management in its must-read Redwood Review. During Q3, some were offering 30-year fixed-rate mortgages at more than 25 basis points less than conforming rates, when typically these are 25 bps higher.
- "We have never witnessed jumbo loan pricing quite like this," says Redwood, and it's particularly curious why banks would want long-duration assets just at the time when rates look to be headed higher. The answer is an abundance of liquidity and a desire for loan and interest income growth trumping the potential consequences down the road. "It is difficult to estimate how long this condition might persist."
- Last night, Redwood reported taxable EPS of $0.24 and book value slipping $0.04 to $14.65 in Q3 after payment of a $0.28 dividend.
- Related ETFs: FAS, XLF, FAZ, UYG, KRE, KBE, VFH, IYF, SEF, IAT, IYG, FXO, PFI, KBWB, KME, RKH, QABA, RWW, RYF, KRU, FINU, KBWR, PSCF, KRS, FINZ, FNCL
Oct. 22, 2013, 1:25 PM
- The mutual fund giant greatly boosts its ETF presence, rolling out 10 sector ETFs on Thursday, with BlackRock (BLK) - whose iShares has its own suite of sector ETFs - as the funds' sub-advisor. State Street (STT), though, is better-known for its sector offerings. Launching on Thursday - and popular existing State Street SPDR ETFs they'll be competing with:
- Fidelity MSCI Consumer Staples Index ETF (FSTA) - XLP.
- Fidelity MSCI Consumer Discretionary Index ETF (FDIS) - XLY.
- Fidelity MSCI Energy Index ETF (FENY) - XLE.
- Fidelity MSCI Financials Index ETF (FNCL) - XLF.
- Fidelity MSCI Health Care Index ETF (FHLC) - XLV.
- Fidelity MSCI Industrials Index ETF (FIDU) - XLI.
- Fidelity MSCI Information Technology Index ETF (FTEC) - XLK.
- Fidelity MSCI Materials Index ETF (FMAT) - XLB.
- Fidelity MSCI Telecommunications Services Index ETF (FCOM) - XTL.
- Fidelity MSCI Utilities Index ETF (FUTY) - XLU.
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