Today's Top Stories Also Noted: Dow Jones News From the Fierce Network:
Today's Top News1. Wells Fargo a leader in balance sheet risk
Who is the biggest balance sheet player of the top consumer banks? I tend to think of Wells Fargo as a conservative bank, one that prefers to stick to its knitting in terms of low-margin consumer banking and mortgages. This comes in part from its relatively small presence in capital markets activity. But by one measure, Wells Fargo is among the riskiest of the big banks. "Wells Fargo's $227 billion portfolio of securities marked for sale yielded 3.97 percent at the end of June, the most among 17 of the largest U.S. banks measured by CreditSights," according to Bloomberg. The company's investments appear to have more credit and interest-rate risk than rivals, CreditSights said. "Faced with sluggish loan growth and more deposits, U.S. banks are searching for ways to generate revenue. While some lenders have stayed in short-term, low-risk securities such as Treasuries, others such as San Francisco-based Wells Fargo have added to holdings with higher interest rates and longer maturities." I think Wells Fargo is on the leading edge in this regard. Banks will increasingly be forced to take more risk with their balance sheets. They really have no choice, and an increase in rates does not seem likely given the Fed's recent hints. So an obvious course for many will be to selectively boost their holdings of higher-yielding fare. As rate pressure step up, more banks will boost their exposure to corporate bonds, CMBS, and CLOs. MBS will surely become a bigger holding at most banks. Risk managers can't afford to get too loose. For more: Read more about: Wells Fargo, balance sheet
2. MERS remains a sporadic issue
MERS has survived some of the biggest legal controversies that had clouded its future over the past two years. It made some changes -- including no longer conducting foreclosures -- and has racked up about as many state court wins as losses. So far, no credible alternative has emerged, but that doesn't mean the bank-owned registry has emerged free and clear of all controversy. An esteemed New York Times columnist has highlighted a case of wrongful fees that amounts to a shocking case of mistaken identity, on that raises issues about the accuracy of MERS information. In this case, the lack of data as to who owned a second lien led to some rather absurd legal maneuvers, all stemming from the fact that Wells Fargo did not even know it owned a second lien as well as a first lien. MERS touts that it make the ownership of loans more transparent. "Amid the foreclosure crisis, however, critics have contended that the registry actually served to hide the true owner of a mortgage, making it difficult for borrowers to get help in working out their loans." The facts in the case at issue "seem to indicate another flaw with the MERS registry — that it may not even track mortgages effectively." MERS was the nominee for WMC Mortgage, an entity that held the second lien, but as it turns out, WMC was not the owner. "Many questions arise in this case. For starters, if the MERS registry is the accurate record it claims to be, why didn't Wells Fargo or its lawyers see that it, not WMC, held the second lien when the …. foreclosure began?" I can only hope this is an outlier. Still, the debate rages, though the industry's sticking with MERS. For more: Related articles:
Read more about: mortgages, MBS 3. Moody's: Banks restrained by economy
Are banks now something of a pure play on the economy? Moody's has weighed in with a report concluding that the near-term outlook for banks remains clouded by macro-economic issues. Dow Jones quoted one executive who said that, "Our negative outlook for the U.S. banking system reflects a challenging domestic operating environment, with prolonged low interest rates, high unemployment, weak economic growth and fiscal policy uncertainties." He added that the threat of contagion stemming from Europe "undermines economic recovery in the U.S. and exposes banks to a heightened risk of shocks." But banks have done a better job getting their houses on solid footing. Many have returned to profitability in a very trying time. The worst of the real estate crunch may well be behind the big banks. The report concluded that "if not for these macroeconomic issues, a stable outlook on the recovering U.S. banking system would be reasonable given the improved financial profile of most banks." Of course, the economy is not going to magically heal itself overnight and neither will the mortgage crisis. If the economy takes another turn for the worse, especially the consumer economy, banks would suffer. So they have become cyclical stocks, for better or worse. For more: Read more about: banks 4. Facebook reaches out to buy-side
When Google went public, the stature of the company was such that it forced the lead underwriter, Morgan Stanley, to construct an apparatus to conduct a massive Dutch auction at a fraction of traditional IPO costs. Google had that clout, and before Facebook went public, some sensed it would wield similar influence. But the botched IPO has left it with much less influence, especially compared to where Google stood after its sparkling IPO way back in 2004. It's fair to say that Facebook has some massive challenges ahead of it. The company is self-aware enough to know that it needs to extend some olive branches, especially to the buy-side. The company has reportedly done just that by having COO Sheryl Sandberg meet with Larry Fink, CEO of Blackrock. According to FOX Business, "Fink agreed to talk to Sandberg at the behest of a mutual friend." The news network reports that "Fink and Sandberg discussed both the IPO, and why it was priced at such a lofty level at $38 a share, and how the social media giant might improve its stature with Wall Street. One person with knowledge of the meeting said Sandberg told Fink that the pricing was based in part on the desire of Facebook to make it difficult for Wall Street traders, known as 'flippers' from immediately selling shares at a profit after they were freed to trade…. Fink asked Sandberg why she was more concerned with flippers and not company insiders who are now selling shares, like venture capitalist Peter Thiel. 'From what I understand she didn't have a great answer,' this person said." The best thing that Facebook can do at this point to repair its relationship with the buy-side and the sell-side is to start making CEO Mark Zuckerberg available, even if he is not the financial wizard at the company. The lack of visibility of Zuckerberg before the IPO was an issue. It's also interesting that the COO of the issuer reached out to the buy-side, as the logical choice in most situations would be the CFO. For more: Related articles: Read more about: buy-side, Facebook IPO 5. Analysts duel over Goldman Sachs
Mike Mayo, the esteemed bank analyst, has gone bullish on Goldman Sachs and Morgan Stanley, after chatting with CEO Lloyd Blankfein and COO David Viniar. He upgraded Goldman Sachs and Morgan Stanley to "buy" from "outperform" this week, reports Reuters. Mayo argues that the stocks are trading at near crisis lows despite signs that results will improve. He also is optimistic about Goldman Sachs' ability to weather coming regulations. Mayo raised his price target for Goldman to $142 from $111 and for Morgan Stanley to $23 from $16. His optimistic outlook clashes directly with the view of JPMorgan analysts. They cut their rating on Goldman Sachs to underweight "and put it dead last behind Europe's investment banks and Morgan Stanley," reports Deal Journal. One big driver of the change was simple valuations. The shares were deemed "too rich for the current doldrums of investment banking." The analysts also feel that looming regulations will affect Goldman Sachs disproportionately compared with other investment banks. All that, in the analysts' view, justifies a price target of just $107. So who is right? For more: Related articles:
Read more about: Goldman Sachs, Stock Research Also Noted
SPOTLIGHT ON... BlackRock vs. Vanguard in ETFs BlackRock, a big power in ETFs thanks to its iShares line, has seen Vanguard nibble away at its market share for years. We may see some targeted price cuts fairly soon, as the BlackRock fights back. How big a deal would that be for the bottom line? One analyst says that even with such price action, the stock is significantly undervalued. Article Company News: And Finally…Social networking for a new job. Article
©2012 FierceMarkets This email was sent to kumaresan.selva.blogger@gmail.com as part of the FierceFinance email list which is administered by FierceMarkets, 1900 L Street NW, Suite 400, Washington, DC 20036, (202) 628-8778. Contact Us Editor: Jim Kim Advertise Advertising: Jack Fordi or call 202.824.5040 Email Management Unsubscribe from FierceFinance Explore our network of publications: | |||||||||||||||||||||||||||||||||||||||||
Thursday, September 6, 2012
| 09.06.12 | Facebook reaches out to buy-side
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment