Author Archive
The market seems to have factored in most negative elements in relationship to the major banks, but there is a lot to come this year for regionals, and the strongest of them at this time according to Fitch ratings include U.S. Bancorp (NYSE:USB), New York Community Bank (NYSE:NYB) and PNC Financial Services (NYSE:PNC).
Even though major problems remain at larger financial institutions, they are different than the risks involved with their regional cousins, which this year will be the depth of commercial loan defaults, which the regional banks are much more exposed to.
The reason the three banks mentioned above are considered stronger positioned are the outlook for their financials is better than their competitors, and probably most importantly, in the short term, they carry a higher quality of assets in their portfolios, which will determine the performance, and in some cases, probably the survival of some of the struggling regionals.
There has been a lot of positive media coverage of some of the big banks lately, and that has given the impression they are well on the way to recovery, which in general, is far from true, especially with Citigroup (NYSE:C).
It can also seem to imply that the rest of the banking industry is doing good as well, and that is even farther from the truth, as their strongest test is about to come upon them in the next year or so concerning the quality of the commercial loans they originated and still hold.
Interestingly, in spite of the idea there is a lot of progress going forward in the consumer banking market, according to Fitch, they see it getting worse in 2010 as it goes along, and with re-sets about to explode on the industry, that is probably true. Re-sets haven’t been in the news much in the recent past, but they are a real force on the consumer side which has yet to be dealt with, but we are in the midst of right now.
Mortgages aren’t the only concern in this sector either according to the Fitch report, as home equity loans and credit cards continue to be a major problem and they should grow in defaults into 2011, which will continue to put downward pressure on bank earnings for the next year or more, depending on how deeply the problems go.
Although there has been a general, slight improvement in some of the underlying banking industry fundamentals, Fitch still has a negative outlook for the industry in place until these problems truly work their way out of the system.
Another long term factor I will add, is much of what is being touted as mortgage modifications and such are risky in and of themselves, with many thinking it could backfire if after that is done a large percentage of homeowners still stop paying or walk away from their homes. In that case, there is no medicine to deal with the situation when there is no will to want it to be.
The bottom line to me is everything is still up in the air in the banking sector, and it won’t be until the end of 2010 or the beginning of 2011 where we will see how much carnage there really is. Re-sets and commerical loans are the challenge this year, and we’re just in the beginning of those problems happening, with the latter part of 2010 being the commercial loan default time frame.
For regional banks, we’re about to see their period of reckoning and the fallout from the commercial loans they originated. It could devastate those with poor assets on their books.
This article (U.S. Bancorp (NYSE:USB), New York Community Bank (NYSE:NYB) and PNC Financial Services (NYSE:PNC) Strongest Among Regional Banks Says Fitch) was originally developed by and is property of American Banking News. Checkout American Banking News for up-to-date banking news and peer to peer lending news.
Investors Continue to be Bullish on Goldman Sachs (NYSE:GS)
Posted by: | CommentsThe populist uprising against Goldman Sachs (NYSE:GS) has done little to deter the bullish attitude of investors toward the company, and they continue to pour money into the financial institution, as confidence they’ll continue to excel is strong.
This is one important thing to keep in mind for investors and those watching the media circus surrounding Goldman Sachs and some other banks. While politicians and the media love to gain points through making companies look bad, at the same time you must work through the clutter to see what is really going on. And when people and institutions do that with Goldman Sachs, they obviously like what they see.
Most analysts look for a strong performance this year by Goldman, with estimates they’ll earn $18.46 a share in 2010 and increase to $20.46 a share in 2011. At this time the shares in Goldman are trading at 9 times 2010 earnings and 8.5 times 2011 earnings.
Legendary investor Warren Buffett seems to concur with this assessment with his actions, as he plowed a lot of money into the company during the worst part of the recession, and I’m sure is still looking for dips to buy in.
That’s the secret with Goldman and others of course, to buy when they’re priced below what they’re really worth. Again, that’s why we must look past the clutter and focus on the underlying fundamentals of the business of the company.
For example, Warren Buffett knew the media coverage of Goldman was largely hysterics and would pass. It’s one thing to get the blame for what’s happening in difficult times, and another to really be a poorly run company or one that is extremely shady in its dealings. Goldman is neither, contrary to the silly and mostly unprovable reports made about them.
As long as a company has negative media coverage that is more venting than based on facts and real shady dealings, it eventually passes as the news cycle changes. And even though the recession has been a long news cycle because it has been long itself, Goldman is starting to be neglected more as other stories emerge.
This is why when things are negative but not dangerous to the survival of a quality company, it’s a great buying opportunity. Goldman has been all of that for quite a while.
This article (Investors Continue to be Bullish on Goldman Sachs (NYSE:GS)) was originally developed by and is property of American Banking News. Checkout American Banking News for up-to-date banking news and peer to peer lending news.
The big banks are enjoying a good week for IPOs, as almost all of them were involved with two ocean shipping companies – Baltic Trading and Crude Carriers, and also health sciences company Aveo Pharmaceuticals, Bank of America (NYSE:BAC) and Wells Fargo Corp. (NYSE:WFC), JPMorgan Chase & Co. (NYSE:JPM) and Morgan Stanley (NYSE:MS) all partook in the management of the deals for one or the other.
Cruder Carriers just went public, while Baltic Trading went public earlier this week. But the idea they felt it was a good time to take the chance may be a good sign for the giant financial institutions to generate some significant revenue and profits if other companies continue to follow in their footsteps.
One thing everyone is watching are so far the IPOs this week aren’t performing that strongly, and have pulled back or barely broke even, depending on when you check up on their share price. That could have a negative impact on other IPOs if they continue to perform in lackluster ways. That would indicate the market isn’t quite ready to take on new business, and aren’t convinced the economy has turned around in a manner which can sustain going public at this time.
While shipping is a good long-term play as far as those two companies go, in the short term they will probably be slow moving stocks until business begins to really kick in again.
The same will probably be true of Aveo, as a pharmaceutical is always cyclical and branding them takes a long time.
Taking into consideration other recent initial public offerings, and you don’t get a lot to rejoice about if you’re the big banks, but there does seem to be more consistency in the business, and the market has pretty much factored in the poor economic conditions, which the share prices of the new offerings, for the most part, all reflect.
If those going public understand this, they should continue to undertake the process for the benefit of all those involved.
Managing the Crude Carriers IPO was Bank of America and Wells Fargo Corp and UBS, while JPMorgan Chase & Co. and Morgan Stanley handled the Aveo IPO.
This article (IPO Market Hot This Week for Bank of America (NYSE:BAC) and Wells Fargo Corp. (NYSE:WFC), JPMorgan Chase & Co. (NYSE:JPM) and Morgan Stanley (NYSE:MS)) was originally developed by and is property of American Banking News. Checkout American Banking News for up-to-date banking news and peer to peer lending news.