24/7 Wall St. » WFC

What’s Important in the Financial World (2/9/2012) A Mortgage Deal With Banks, Yahoo! to Sell Alibaba?

247wallst — Thu, 09 Feb 2012 11:38:05 +0000

As one set of government suits against America’s largest banks is settled, another is about to begin. Media reports say that federal regulators and state attorneys general have set a $25 billion deal with Ally Financial, Bank of America (NYSE: BAC), Citigroup (NYSE: C), JP Morgan (NYSE: JPM) and Wells Fargo (NYSE: WFC). These lenders have been accused of abusing the foreclosure process for their own financial advantages. States and the federal government would receive payments, along with thousands of people whose homes were foreclosed on from 2008 to 2011. Just as this home mortgage matter is settled, the government means to sue banks that misrepresented the value of mortgage backed securities that they sold to other large institutions. The Wall Street Journal reports that the banks that are part of the second investigation include Ally Financial, Bank of America, Citigroup, Deutsche Bank (NYSE: DB) and Goldman Sachs (NYSE: GS). Between mortgages and mortgage instruments, the housing collapse will cost major banks tens of billion of dollars.

Greeks in Brussels

The Greeks have departed for Brussels, where they will plead with the European Union, International Monetary Fund and European Central Bank for the money needed to cover the nation’s financial needs next month. The parties have until February 15 to reach a settlement. The Greeks say they have given in to all austerity requests but have no deal to cut some government-controlled pensions. So, after all of the negotiations, that single issue may drive Greece into default.

Luxury Car Sales

At least some rich people around the world do not think their wealth will be entirely stripped away by taxes. Daimler said it had a 39% increase in fourth-quarter profits. It said the primary driver was an upswing in sales of high-end Mercedes, particularly the car company’s M-Class SUV. Daimler is not alone. BMW posted similarly impressive earnings, as did Volkwagen’s Audi division.

Yahoo! and Alibaba

Yahoo! (NASDAQ: YHOO) may finally get some tangible value from its 39% holding in large China e-commerce company Alibaba. Rumors suggest that Alibaba is close to securing bank loans of as much as $3 billion. Wall St. thinks the Alibaba stake is worth closer to $5 billion, so the firm may have to use some of its own money. Now, investors will have to wait to see what Yahoo! does with the cash. There is almost no optimism that Yahoo! has the management and prospects to use the billions to rebuild its troubled businesses. Yet, with a new CEO and newly constituted board, a turnaround is at least a long shot.

Douglas A. McIntyre

Filed under: 24/7 Wall St. Wire, Market Open Tagged: BAC, C, DB, GS, JPM, WFC, YHOO

Should Banks Have Overdraft Fees? (JPM, ZION, BAC, CBSH, WFC)

Administrator — Tue, 07 Feb 2012 20:48:12 +0000

While not breaking news at this point, there is something that is front and center in banking when it comes to overdraft fees. To many consumers, overdraft fees are simply nothing more than a tax on people who cannot fill their bank accounts with very much money. No one cares what bankers think anymore, but the flip-side of the overdraft fee is that if they are not in place the banks will be on the hook when customers choose to not put money back into a bank with a negative balance and that many customers will go in the red frequently. If a bank denies a check’s ability to be used because a customer’s account would go into the red, the customer feels bad at the register and gets mad at the bank.

We want to know what you think below. Look at how much some banks have paid to settle overdraft charges and then decide in our poll below…. Should banks have overdraft fees???

So here are some recent settlements and other overdraft fee news…

J.P. Morgan Chase & Co. (NYSE: JPM) was asked by the U.S. District Court of Southern Florida in Miami to pay $110 million over a class suit for charging of inappropriate overdraft fees to its customers. Zions Bancorp. (ZION) was accused in late 2011 of improper overdraft fees over its policies in place from 2005 to 2010.

Bank of America Corporation (NYSE: BAC) and Commerce Bancshares Inc. (NASDAQ: CBSH) were ordered to make payments over unfair trade practices in overdraft situations: Commerce Banc paid $18.3 million; Bank of America was asked to pay $410 million to settle unfair overdraft fees charges.

Now go back to 2010. Wells Fargo & Co. (NYSE: WFC) was ordered to pay $203 million by a California court to compensate customers suing over unfair overdraft fees.

JON C. OGG

Filed under: 24/7 Wall St. Wire, Accounting, Banking, Corporate Governance, Economy, Personal Finance, Polls, Regulation Tagged: BAC, CBSH, JPM, WFC, ZION

Citi Dividend Returning Sooner Than Expected (C, JPM, WFC)

Administrator — Mon, 06 Feb 2012 22:26:44 +0000

Any time you have a shareholder talking up a company, you have to understand that they are talking up their book. Billionaires do this, and they tend to be listened to more than others when it comes to money. After the close of trading on CNBC, Maria Bartoromo interviewed Prince Alwaleed bin Talal of Saudi Arabia.

The prince is a very long-term investor in Citigroup Inc. (NYSE: C). He is also apparently its largest holder. This evening he noted that he expects Citi to begin returning capital to shareholders soon. The stress tests should be finished in March and the prince said is pushing for a dividend hike. He even noted that he held a conversation with Citigroup CEO Vikram Pandit late last week and his opinion is that the new Citi is doing very well.

Citi is one of the ‘too big to fail’ banks and it has paid only a one-cent dividend since it has gotten out from the TARP. After a 1-for-10 reverse stock split, many investors have moved on. The adjusted dividend back in 2007 was $5.40, but it is going to be quite some time before investors expect that to remain.

Thomson Reuters is predicting that Citi will have normalized earnings at $4.04 EPS in 2012 and $4.70 EPS in 2013. If the bank is ever allowed to return 40% of its normalized earnings, Citi could pay out $1.60 or so per share in annualized dividends. That is a big if, but at $33.30 it would generate a dividend yield of 4.8%.

Again, that IF is a really big ‘if’ based on the regulatory climate of today. The one bank that is expected to be among the very first to raise the common stock dividend is J.P. Morgan Chase & Co. (NYSE: JPM). Its $0.25 per quarter dividend used to be $0.38 per quarter before the bubble burst. We also expect a higher dividend coming down the pipe from Wells Fargo & Co. (NYSE: WFC) as its $0.12 per quarter dividend compares to $0.34 before the bubble burst.

JON C. OGG

Filed under: 24/7 Wall St. Wire, Banking, Corporate Governance, Dividend, Financial Stocks Tagged: C, JPM, WFC

What’s Important in the Financial World (2/6/2012) Greek Settlement, GM Profit Target

247wallst — Mon, 06 Feb 2012 11:44:41 +0000

Time has finally run out for Greece. The European Union, European Central Bank and International Monetary Fund have said they are tired of waiting to see if Greece can cut is budget again. Some members of Parliament in the southern European nation say the requested cuts are too great. Unions have staged powerful protests to show the government they will not give in to demands for wage cuts. “If we determine that it’s all going wrong in Greece, then there won’t be a new program — and that means in March you’ll have a declaration of bankruptcy,” Luxembourg’s Jean-Claude Juncker, who chairs euro finance meetings, told Der Spiegel magazine. It is unlikely that Juncker would make his opinion so public if the need for a deal was no more than a day or two away.

China’s GDP Growth

The IMF cut its forecast of China’s GDP growth this year. Given the uncertainties about the global financial markets and the GDPs of many nations, that move it not unusual. What is shocking is the size of the negative forecast — China’s GDP growth rate could drop 4% from the current estimate of 8.2%. And the 8.2% is a number reached by a downward revision by the IMF less than two months ago. It is hard to fathom that an economy that has grown at more than 10% a year for the past decade could face such a shock. It is the IMF’s acknowledgement that the entire world could teeter into recession, and that the problems in Europe could effect both China’s trade with that region, but also with the U.S. The latter will not avoid the slump either, the IMF must reason, despite recent, strongly positive signs.

Foreclosure Abuse Deal

State attorneys general and U.S. regulators are just a day from a settlement with Ally Financial, Bank of America (NYSE: BAC), Citigroup (NYSE: C), Wells Fargo (NYSE: WFC) and JPMorgan (NYSE: JPM) over mortgage foreclosure abuses. The settlement would help current homeowners. Some would be allowed to refinance current home loans. Others would get financial assistance. Even if the deal is closed, the implementation could take months. It will take at least that long to sift through which homeowners are worthy of aid, and then to process them to help those who deserve it. The entire face value of the settlement will be $25 billion.

GM Profit Forecast

General Motors (NYSE: GM) says it can make $10 billion a year for the next several years. That would mark a tremendous comeback from its 2009 Chapter 11 filing. It also would validate the decision of the U.S. government to bail out the car company. The challenge GM faces as it presses its goal is that the world’s largest car manufacturers, Volkswagen and Toyota (NYSE: TM), expect to do as well as GM. Toyota just raised its sales forecasts to levels that would take it to a record in units shipped next year, if it can reach the numbers. VW has attacked the U.S. market because it needs American sales to allow it to keep pace with its two major rivals. GM has momentum, but its profit forecasts are large enough to make an uphill battle.

Douglas A. McIntyre

Filed under: 24/7 Wall St. Wire, Market Open Tagged: BAC, C, F, GM, JPM, TM, WFC

Warren Buffett’s Top Stocks of 2012 (BRK-B, SPY, USG, BAC, IR, MCO, INTC, WFC, AXP)

Administrator — Thu, 02 Feb 2012 13:23:17 +0000

2012 is getting off to a great start for the equity markets. We recently looked at the performance of Warren Buffett’s Berkshire Hathaway Inc. (NYSE: BRK.B), which is underperforming this year so far with a gain of 3.1% to-date in 2012. The S&P 500, or the SPDR S&P 500 (NYSE: SPY) is up 5.5%. We looked through all of Warren Buffett’s stock holdings of late and some of his non-equity holdings to see which positions were leading so far.

The surprise winner so far in 2012 after the first month is USG Corporation (NYSE: USG). then there are stocks like Bank of America Corporation (NYSE: BAC), Ingersoll-Rand plc (NYSE: IR), Moody’s Corporation (NYSE: MCO), Intel Corporation (NASDAQ: INTC), Wells Fargo & Co. (NYSE: WFC), and American Express Co. (NYSE: AXP). Yep, the other winners of these seven holdings are mostly tied to finance.

We have evaluated the performance to date (from FinViz.com) and added in some color on each. We have also shown how the price compares to the 52-week highs or to the consensus price target as well, and included in some cases whether the position is substantial or not.

USG Corporation (NYSE: USG) is up 32.8% year-to-date and is actually Berkshire Hathaway’s top performing stock. With so much interest in the bottoming out of housing at some point in 2012, it may not be that ridiculous even if the fundamentals have not changed all that much yet. The concern here is that at $13.50 it now trades above the consensus $13.30 price target. Buffett holds over 17 million USG shares.

Bank of America Corporation (NYSE: BAC) is up 32.4% year-to-date and the new large preferred position is back to where Warren Buffett doesn’t look foolish for dreaming up his investment in BofA while in the bath. At $7.36 there is still plenty of upside to the $8.90 price target and this remains (and is expected to remain) well under book value.

Ingersoll-Rand plc (NYSE: IR) is up 15.5% year-to-date, not bad for what is usually a slower-moving company with a portfolio of industrial and commercial products. At $35.18, it does not have much upside left to the consensus price target of $37.94 but it is still way off the 52-week high of $52.33. Buffett’s position is way down from prior periods and is only 636,600 shares as of the last report. This position just can’t move the entire Berkshire Hathaway Barometer too much.

Moody’s Corporation (NYSE: MCO) is up 11.6% year-to-date. The credit rating agency has been a controversial position that Buffett has lightened up on through time. At $37.60, it is close to the consensus price target of $39.60 and under the 52-week high of $41.93. Buffett did lighten up a bit on this position but still holds roughly 28.4 million shares.

Intel Corporation (NASDAQ: INTC) is up 9.5% year-to-date and is one of the news 2011 investments that Mr. Buffett hid. It was also his first technology pick as far as pure hardware is concerned. At $26.55, Intel is very close to its 52-week high of $27.00 and close to its consensus analyst price target of $27.17.

Wells Fargo & Co. (NYSE: WFC) is up 8.9% year-to-date and is up the least of the big money-center banks. It is also the only one of the money-center banks trading above book value because the restructuring regulatory climate over future earnings will create the least amount of change at Wells Fargo. Buffett keeps adding here and now holds over 361 million shares as one of his biggest positions ever.

American Express Co. (NYSE: AXP) is up 7.7% year-to-date, which is lower than many financials. The recent earnings report showed improvement but perhaps a trend towards peaking of the improving credit metrics of AmEx customers. Buffett’s position is roughly 151.6 million shares.

Berkshire Hathaway’s most recent holdings in entirety can be found here.

If you enjoyed the top analyst calls, you can sign up in the box below to join our morning email list to receive news directly in your inbox each morning. We include major analyst upgrades and downgrades, IPO and M&A news, special situation developments, observations on Warren Buffett and key market gurus, as well as special exclusive feature stories.

JON C. OGG

Filed under: Banking, Buffett, Dividend, Index, Value Investing Tagged: AXP, BAC, BRK-B, INTC, IR, MCO, SPY, USG, WFC

Short Sellers Increase Bets Across the Board

247wallst — Thu, 26 Jan 2012 11:33:04 +0000

For the first time in a long time, short sellers have increased their bets that the stock prices of most large companies and in most large sectors will fall. The NYSE and Nasdaq released their figures for short positions as of January 13.

Short sellers increased their positions in all four of America’s large banks. The short interest in Bank of America (NYSE: BAC) rose 18.5% to 186.1 million. The price of its stock, and most other bank stocks, have risen as it appears that the worst of their balance sheet problems have faded some. Shares sold short in Citigroup (NYSE: C) rose 19.1% to 50.3 million. The short interest in Wells Fargo (NYSE: WFC) was up by 11.4% to 47.1 million. Shares sold short in JP Morgan Chase (NYSE: JPM) were up by 21.5% to 40.6 million.

Shares sold short in the two big car companies also rose. The short interest in Ford (NYSE: F) was up by 14.7% to 147.1 million. Shares sold short in General Motors (NYSE: GM) were up 13.7% to 62.3 million.

The short interest in almost all major tech stocks was up as well. Shares short in Microsoft (NASDAQ: MSFT), which posted relatively good earnings, were up 49.8% to 101.5 million. Shares sold short in Intel (NASDAQ: INTC), which also posted strong numbers for the fourth quarter, rose 12.2% to 131.8 million. The short interest in Dell (NASDAQ: DELL) was up by 6.1% to 69.9 million. Shares sold short in Oracle (NASDAQ: ORCL) were up by 40.8% to 27.4 million.

Douglas A. McIntyre

Filed under: 24/7 Wall St. Wire, Short Interest Tagged: BAC, C, DELL, F, GM, INTC, JPM, MSFT, ORCL, WFC

The Worst Cities for Retirees to Find Work

Mike Sauter — Wed, 25 Jan 2012 11:39:44 +0000

Just because you’re retired doesn’t mean you don’t have to work. As of the end of last year, 7.3% of Americans 75 and older were employed — the highest level since 1966, according to The Wall Street Journal. But as the number of job seekers among retirement-age people has increased, so has the unemployment rate among that age group. It is now twice what it was five years ago.

The issue of unemployment among older Americans is even more important now because retirement plans lost so much money since the recession began. 24/7 Wall St. reviewed employment data from the Bureau of Labor Statistics to identify the cities with the highest unemployment rates for Americans 65 and older.

The cities with the highest unemployment rates among those 65 and older do not necessarily have the highest unemployment rates among the general population. In fact, many of the metropolitan regions on the list have unemployment rates below the national average. In five of the six cities on our list, unemployment rates are substantially worse for those 65 and older than for the population as a whole.

The reason for this disparity among the age groups can be attributed to the fact that these cities, for the most part, rely heavily on industries like finance, banking, telecommunications and technology — areas that have a high percentage of professional or specialized jobs. More than many other fields, these kinds of jobs require a high degree of training. For those seeking to reenter the workforce, or change their line of work, this can present a challenge.

24/7 Wall St. reviewed labor force statistics from the Bureau of Labor Statistics’ Current Employment Statistics survey. This study provides age-based information for 46 of the largest metropolitan statistical areas in the country for the years 2005 to 2010. In seven of these metropolitan regions, unemployment rates in 2010 — the most recent available data — were higher for older Americans than for the entire population. We examined unemployment rates, labor participation and total unemployment for these regions, also from the Current Employment Statistics, to get a better look at the employment picture as a whole. We examined median income and population change over a 10-year period in these metro areas from the Census Bureau’s American Community Survey.

Filed under: Special Report Tagged: AMZN, BA, BAC, MSFT, SBUX, WFC

Bank of America Earnings, Rising Tide Lifts All Ships (BAC, WFC, JPM, C, BRK-A)

Administrator — Thu, 19 Jan 2012 12:48:16 +0000

Bank of America Corporation (NYSE: BAC) was already the best performing DJIA stock with gains of more than 20% since the end fo 2011. Now it has even more legs after the troubled money-center bank posted a $2 billion profit in its fourth quarter. Earnings were more or less in-line with estimates at $0.15 EPS and revenue grew more than 10% to $25.1 billion.

Bank of America is trading at a healthy discount to its book value. The stated book value is $20.09 per share and the tangible book value is now up to $12.95. Even with a $6.80 pric after a 20% gain in two weeks, this is a steep discount. The Warren Buffett investment from Berkshire Hathaway Inc. (NYSE: BRK-A) looks like it may pay off now.

Bank of America was the last of the money-center outfits to report and shares are indicated up about 5.5% at $7.17 in active pre-market trading. The move is also good for other banks which have reported:

Wells Fargo & Co. (NYSE: WFC) is indicated up 0.6% at $30.42 and it trades above book value.

J.P. Morgan Chase & Co. (NYSE: JPM) is up 1.2% at $37.00 and Citigroup Inc. (NYSE: C) is up 1.6% at $29.50.

JON C. OGG

Filed under: Banking, Brokerage Firms, Earnings, Financial Stocks Tagged: BAC, BRK-A, C, JPM, WFC

Media Digest (1/18/2012) Reuters, WSJ, NYT, FT

247wallst — Wed, 18 Jan 2012 11:48:13 +0000

Yahoo! (NASDAQ: YHOO) founder and former CEO Jerry Yang leaves the company’s board. (Reuters)

The World Bank sharply cuts global growth forecasts. (Reuters)

Greece and private creditors race to settle on a deal to avoid a financially dangerous default. (Reuters)

Fallout from the Chinese housing bubble may hit GDP. (Reuters)

More Americans use savings to help during what remains a harsh economic climate. (Reuters)

Olympus says the potential of an equity partner would be delayed until new management receives appointments. (Reuters)

Kraft Foods (NYSE: KFT) plans to cut 1,600 people when it breaks into two companies. (Reuters)

Asia-based companies may buy Research In Motion (NASDAQ: RIMM); Samsung states it has no interest. (Reuters)

Calpers plans to sell much of its real estate portfolio. (WSJ)

A Harvard Business School project finds that graduates voice concerns about the tax code and political gridlock. (WSJ)

More companies buy Apple (NASDAQ: AAPL) Macs than in past years. (WSJ)

Wells Fargo (NYSE: WFC) and Citigroup (NYSE: C) report loan growth as they announce earnings. (WSJ)

More Chinese citizens now live in cities rather than rural areas. (WSJ)

Spain plans to cut debt within it major states. (WSJ)

The National Science Board says more R&D jobs have moved to Asia. (WSJ)

The National Automobile Dealers Association says new fuel economy rules would damage sales. (WSJ)

An Abu Dhabi-based fund puts money into struggling UniCredit. (WSJ)

The FDIC proposes bank stress tests. (WSJ)

The United States Conference of Mayors says few cities have added jobs since the recession. (NYT)

Prime Minister Lucas Papademos says many investors in Greek sovereign paper will take large losses. (NYT)

Factory growth in the U.S. beats that among all G7 nations. (FT)

The World Bank says developing nations should prepare for a poor economic environment. (FT)

Bank of America (NYSE: BAC), Barclays (NYSE: BCS), Credit Suisse (NYSE: CS) and Goldman Sachs (NYSE: GS) will all bid for AIG (NYSE: AIG) debt portfolios held by the U.S. government. (FT)

Central banks increase the gold they lend for the first time in a decade. (FT)

Douglas A. McIntyre

Filed under: Press Digest Tagged: AAPL, AIG, BAC, BCS, C, CS, GS, KFT, RIMM, WFC, YHOO

24/7 Wall St. Closing Bell (FDX, BHP, INTC, TSLA, PNRA, MMR, AMTD, WFC, C, CHKP, KUTV, CNVO, VQ, RRD, CCL)

Paul Ausick — Tue, 17 Jan 2012 21:09:27 +0000

The markets opened higher this morning and all three major indexes have managed to hold onto most of their gains of the early morning. The S&P 500 index topped 1,300 for the first time since last summer, but hasn’t been able to remain at that level. The US dollar is trading weaker against the euro, but stronger against both the British pound and the Japanese yen. The dollar index is down a bit more than -0.5% at 81.071. Energy companies have done well today, even though natural gas prices have fallen below $2.50/thousand cubic feet. WTI crude oil is up nearly 2% at $100.62/barrel, while Brent crude is up only fractionally at $111.38/barrel. Gold is up more than 1% at $1,650.70.

The unofficial closing bells put the DJIA up about 60 points to 12,482.22 (0.48%), the NASDAQ rose more than 17 points (0.64%) to 2,728.08, and the S&P 500 rose 0.35% or nearly 5 points to 1,293.66.

There were several analyst upgrades and downgrades today, including FedEx Corp. (NYSE: FDX) cut to ‘hold’ at Jefferies; BHP Billiton Ltd. (NYSE: BHP) started as ‘buy’ at Goldman Sachs; Intel Corp. (NASDAQ: INTC) cut to ‘neutral’ at JPMorgan; Tesla Motors Inc. (NASDAQ: TSLA) raised to ‘buy’ at Wunderlich; and Panera Bread Co. (NASDAQ: PNRA) raised to ‘overweight’ at Morgan Stanley.

Earnings reports since markets closed last Friday have led to some price changes as of the last half hour of trading today: McMoRan Exploration Co. (NYSE: MMR) is up 4.55% at $13.32; TD Ameritrade Holding Corp. (NASDAQ: AMTD) is down -1.72% at $16.02; Wells Fargo & Co. (NYSE: WFC) is up 0.67% at $29.81; Citigroup Inc. (NYSE: C) is down nearly -8% at $28.29; and Check Point Software Technologies Ltd. (NASDAQ: CHKP) is up nearly 8% at $54.93.

Other standouts from today include the following stocks:

Ku6 Media Co., Ltd. (NASDAQ: KUTV) is up nearly 154% at $3.50. The Chinese online video company has signed an agreement with Google Inc. (NASDAQ: GOOG) to offer international viewers a Chinese video channel on YouTube.

Convio Inc. (NASDAQ: CNVO) is up nearly 48% at $15.89, after setting a new 52-week high earlier. The provider of software to non-profit organizations has agreed to be acquired by Blackbaud Inc. (NASDAQ: BLKB) for $16/share, or about $312 million.

Venoco Inc. (NYSE: VQ) is up nearly 31% at $10.05. The independent oil and gas company is being taken private by its CEO. We have more coverage here.

R.R. Donnelly & Sons Co. (NYSE: RRD) is down nearly -16% at $12.12 after posting a new 52-week low of $12.08 earlier. The business services company said revenues for 2011 are going to be lower than expected.

Carnival Corp. (NYSE: CCL) is down nearly -14% at $29.57. The cruise ship operator is sinking following the disaster off the Italian coast that has left 11 dead and 29 missing. We have more coverage here.

Stay tuned for Wednesday. Federal Reserve Bank governor Daniel Tarullo is giving a speech. We have the following events on the schedule (all times Eastern):

7:00 a.m. – Mortgage Bankers Association mortgage applications
8:30 a.m. – Producer price index
9:15 a.m. – Federal Reserve report on industrial production
10:00 a.m. – Housing market index

Paul Ausick

Filed under: HI/LOW, Market Close, The Day Tagged: AMTD, BHP, C, CCL, CHKP, CNVO, FDX, INTC, KUTV, MMR, PNRA, RRD, TSLA, VQ, WFC