Weekly Financial Biz Recap: DB Rumor Put to Rest, Overdraft Investigation Scares Banks
BNY Mellon (NYSE:BK) has a court date with the IRS Monday, regarding BNY’s participation in Barclays’ (NYSE:BCS) “Stars” tax avoidance scheme. The IRS says that the bank’s use of the scheme might have led to a tax revenue loss of more than $1 billion. The suit is to determine if the Stars, used to obtain low-cost financing, is legal, or if it allows users to get credits for charges that were not incurred.
Online broker Charles Schwab’s (NYSE:SCHW) first quarter earnings statement is in, and shares are up and down, reflecting the nature of the report. Profits year-to-year sagged by 20 percent due to higher marketing and compensation costs, but the better news is that 240,000 new accounts were opened during the quarter.
Citigroup’s (NYSE:C) first quarter results pleased Nomura’s Glenn Schorr, who called it a “well-rounded quarter”. The analyst points out growth in deposits and loans, backed by impressive control of costs. He adds that he will review his estimates and $47 price target that accompany his Buy rating, remarking that, “We think Citi’s executing according to plan and the stock is cheap.”.
In February transactions, Credit Suisse (NYSE:CS) and Goldman Sachs (NYSE:GS) paid off the remaining Maiden Lane II mortgage bonds that belonged to AIG until its bailout. The NY Fed received $10.3 billion in the payment.
Affiliates of Lee Equity Partners take wealth management firm Edelman Financial Group (EF) private at $8.85 per share, or approximately $257.5 million, which represents a 43 percent premium over their Friday closing price.
Investing Insights: Citigroup’s Earnings Shocker
Cutting costs at Goldman Sachs (NYSE:GS) has reduced operating expenses by 14 percent year-to-year, to $6.77 billion, which were led by reduction of 16 percent in compensation, down to $4.38 billion. However, revenues from investment banking were down as well, some 9 percent year-to-year to $1.15 billion, and net FICC revenue down by 20 percent to $3.48 billion. Net revenue from Investment Management were also off 8 percent, to $1.18 billion. Goldman’s outlook is still cautious regarding the “fragility” of the economic recovery and mixed investor sentiment. CFO David Viniar explained to analysts on a conference call that the debt crisis in Europe still heads the lists of the company’s worries, and that mergers and acquisitions activity “has not yet gained momentum.” Goldman Sachs Group Inc. Earnings: Revenues and Net Income Fall>>
Shares of Comerica (NYSE:CMA) rise following reports that the company solidly beat its first quarter consensus. Net earnings jumped 26 percent year-to-year, reinforced by an increase of 8 percent in loan growth, alongside a marked drop in loan-loss provisions. In addition, charge offs stood at their lowest level since the third quarter of 2007, falling to 43 percent of average loans, comtrasted to 103 percent a year earlier and 57 percent in the fourth quarter 2011.
Bank of America (NYSE:BAC) wants to divest its overseas wealth management operations for as much as $3 billion, according to Reuters. Reason given was that the unit manages $90 billion of assets but that insufficient cash is generated.
Shares of Citigroup (NYSE:C) move up as its shareholders turn its executive compensation plan down, after consulting firms termed the incentive pay as “substantially discretionary … lack rigorous goals.” Chairman Dick Parsons remarked, “That’s a serious matter. The Board of Directors … will seek a more quantitative, formula-based method.”
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The announcement that Warren Buffet is diagnosed with Stage 1 prostate cancer. pushed Berkshire Hathaway (BRK.A), (BRK.B) shares lower at opening. However, Buffett advises CNBC that nothing has changed in the company’s succession plans.
An earnings conference call by Huntington Bancshares (NASDAQ:HBAN) reveals that the company is seeking out purchase targets of the $500 million to $2.5 billion range, and is also reviewing its dividend and stock repurchase options. Also announced was a new credit card product for next year.
In the face of Goldman Sachs’ (NYSE:GS) first quarter rebound in risk assets, the firm reported Tuesday that its “value at risk” dropped to its lowest level since before the financial crisis. Nomura’s Glenn Schorr commented in response that “When I see pull back risk that much that quickly, I get a little anxious about what could be around the corner.”
Deutsche Bank (NYSE:DB) quashes the Wall Street Journal rumor on Thursday that it has to raise up to €3 billion this summer, in preparation for Basel III rules. A bank spokesperson says that Basel targets may be reached without such a move.
Scolding Goldman Sachs (NYSE:GS), Sequoia Fund announces in a letter that it intends to vote against GS director and former Fannie Mae CEO James Johnson, with the recommendation that other shareholders do likewise. The letter goes on to say that “Mr. Johnson has been at the center of several egregious corporate governance debacles.”
First Horizon (NYSE:FHN) shares fall following release of the bank’s first quarter earnings, which dropped 24 percent as it increased its reserves against loan losses. However, Wunderlich comments that even with its results missing consensus, FHN will continue to improve its bottom-line performance as it emerges from this credit cycle. The analyst also remarked that current share undervalue could represent a buying opportunity. First Horizon Earnings Cheat Sheet>>
Blackstone (NYSE:BX) posted less than exciting first quarter results, and its merger / acquisition and private equity competitors do not appreciate BX’s bleak comments regarding the dealmaking environment, which included such sentiments as, “Emerging markets are slowing, Europe is weak… corporations want to sit on cash… fundraising is tough… most big funds are going to be much smaller than they were before.”
Nine of the top banks, including Bank of America (NYSE:BAC), JPMorgan (NYSE:JPM) and Wells Fargo (NYSE:WFC), are being investigated by the Consumer Financial Protection Bureau, in regards to their overdraft protection programs and their justifications as to the size of their overdraft charges, according to a Bloomberg report. The action could well pose another threat to a major source of income for the companies.
MetLife (NYSE:MET) mistakenly posted some first quarter figures on its website ahead of next Thursday’s official release date, and now is releasing a preliminary version of those results: the firm expects to post operating earnings of $1.37 per share, which would beat consensus of $1.25.
Shares of NCR (NYSE:NCR) jump, following its first quarter statement that handily exceeds consensus. As opposed to Met’s industry peers, its net margins more than doubled, along with a report of ‘solid growth in its financial services segment, particularly with U.S. regional lenders and in emerging markets’. The firm’s rivals are now trying to catch up, after delaying upgrades for their ATMs during the recent times of economic and financial chaos.
Progressive (NYSE:PGR) CEO Glenn Renwick’s warning to investors that the company might experience margin difficulties due to claims cost jumps, causes shares to slide. He also noted that “Severity trends in most coverages are increasing and, while frequency trends are still generally favorable, it’s a dangerous combination that can change quickly.”
Short-term cash lender EZCorp (NASDAQ:EZPW) shares visit 52-week lows following a fiscal second quarter earnings per share report that missed estimates, although profit rose 17 percent at the same time. Full-year guidance was lowered, projecting earnings per share in the current year at $2.95 tops, which is below an earlier estimate of $3.05.
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