Stock Quote
Recent Posts
Big lots
August 30, 2008 12:31 AM
Ronnie Segev poses question
August 29, 2008 09:03 PM
Ronnie Segev poses question
August 29, 2008 09:02 PM
Dollar Rally Boosts Small Caps, Routs Gold, Foreign Stocks
August 29, 2008 04:47 PM
Will BigLots (BL) bring you lots of profit or a big disappointment?
August 29, 2008 04:40 PM
Copying Filepath to Clipboard (Mac)
August 29, 2008 01:16 PM
Updating the IP Video Lineup
August 29, 2008 10:43 AM
To add an specific blogger's feed, simply go to their blog and click on their individual RSS link.
Bad Week for Banks
Another week past, another bad week for bank stocks. Naturally, as always when it comes to bad news, the leader was Citigroup. The banking giant announced that they would have to take additional write downs in the next quarter. Although the losses will not be as large as the $10.5 billion last quarter, CFO Gary Crittenden did say they would be substantial. Continuing real estate and economic woes are having a negative impact on the banks real estate and credit card lending portfolios Mr Crittenden said that consumer credit remains challenging especially in the credit card portfolio where the losses are expected to be more than $5 billion. Results will also suffer form the inclusion of a $325 million loss on the sale of leasing company CitiCapital. This quarter Citi won't have a billion plus dollar gian form the sale of Visa shares to offset the losses either.
Ohio based Fifth Third bank announced last week that they would have to raise additional capital as a result of poor credit experience. In addition to cutting the dividend by better than 60%, Fifth Third announced that they were doing a billion dollar offering of preferred stock and hoped to raise another billion by years end with the sale on assets considered to be non core operations. Bank officials cited continued weakness in credit markets for the decisions. KeyCorp, another Ohio based bank cut its dividend by netter than 505 and said they would raise $1.65 billion to offset credit losses. In addition KeyCorp said that they would take a charge of over 41 billion as a result of an adverse tax ruling on a leveraged lease transaction.
Several research and investment firms noted that things are just not getting any better for the banks. Goldman Sachs released a report that said it was unlikely conditions improved in the sector until at least 2009. The Investment firm said that banks are going to have harder time raising money as the year goes on. So far this year, over $60 billion has been raised by banks via the sale of stock sand convertible securities. They also noted that as conditions worsened analysts will lower their estimates for banks earnings and this will push the price of banks stocks even lowered than they have already fallen. Merrill Lynch research analysts said that they did not expect the credit crisis to end until 2010 and that there will be more dividend cuts head for larger banks in the United Sates. Analyst Edward Najarian cut his estimates for banks earnings by an average of 22% he also expects loan charge offs and loan loss provisions to triple in 2008.
It simply is not getting any better for the larger banks in the US. Calling a bottom in banks stocks is an exercise in futility. Several analysts and fund manager have done so in recent months only to see shares continue to fall. Faced with credit problems that now look to last at least a year longer than anticipated, dividend cuts, layoffs and falling earnings the industry is simply unlikely to offer attractive returns for awhile yet.
When the last bank stock bull throws in the towel and the shares trade 40% or more below where they are now, it might be time to buy the group. Until then, the risks far outweigh the rewards and I would avoid money center and regional banks for the foreseeable future.
Tags:
Post a comment
