Today's Top Stories Also Noted: Opal Financial Group News From the Fierce Network:
Today's Top News1. Citigroup's fourth quarter earnings disappoint
Citigroup reported earnings of $0.38 a share for the fourth quarter, which was well below expectations. The culprit largely was the $1.3 billion of legal costs and related expenses that the bank had to swallow. Excluding the DVA and what the bank calls "repositioning" charges, the bank earned $0.69 per share, up 68 percent from a year ago. At a time when people are skeptical about the organic growth prospects of banks, there were some other silver linings. Citigroup posted revenues of $18.7 billion in the quarter (excluding the DVA), up 8 percent year over year, reflecting a 9 percent surge in the good bank, which was offset by a 2 percent decline in the bad bank. Global banking operations were able to hike revenues 4 percent, though net income sank 2 percent. North America bank revenues grew 3 percent to $5.3 billion thanks to higher retail banking revenues that were partially offset by lower card revenues. Another bright spot was investment banking and trading. Investment banking revenues rose a solid 56 percent, and FICC-oriented revenues rose 58 percent year over year. Sequentially, however, FICC-oriented revenues fell 27 percent. In a minor disappointment, the bank released a net $86 million of loan loss reserves in the fourth quarter, compared to $1.5 billion a year ago. This represents the first earnings release of the Michael Corbat era. For more: Related articles: Read more about: bank earnings
2. CFPB leaves GSE questions unanswered
The Consumer Financial Protection Bureau's new mortgage rules have ignited lots of debate. One view is that the new rules will crimp mortgage lending at least in the short term. One could argue that a net decline in lending is a good thing if it will end the once-rife practice of giving anyone a loan regardless of the loan quality or the debtor's ability to repay. Overt time, these rules should lead to much higher quality loans and much more safety from legal liability for lenders that make qualified loan. Either way, the conditions for a lasting, healthy recovery in the housing sector are slowly materializing. But there is still work to be done. Bloomberg reports that, "Other pieces must fall into place, including finalizing -- and harmonizing -- a rule detailing which types of mortgages will be exempt from a requirement that lenders retain a 5 percent financial stake in loans that are packaged into securities and sold. Capital levels for banks must also be firmed up so companies can determine how much they can safely lend. Most important, the U.S. must outline its plans for Fannie Mae and Freddie Mac, which own or guarantee about 84 percent of mortgages, including whether the U.S. will continue to offer a mortgage guarantee at all." At this point, it would appear that the industry and the government are willing to live with Fannie and Freddie in their current states, that is, as government-owned entities. It seems clear at this point that the GSE reform push has stalled. It may be that we can't get a quick recovery without them, so the status quo is likely to exist for some time. For more: Related articles:
Read more about: mortgages, Foreclosures 3. Did Goldman Sachs regain it's edge?
In the immediate aftermath of the financial crisis, around the time Goldman Sachs sought a commercial bank charter, it seemed as if the gilded bank was mortal. But over the past few years, it has been slowly regaining a sense that it is a cut above its peers. Unexpected Returns notes that "a long-evolving story about how Goldman has widened its advantage over most of its banking peers, through both its own constructive actions over the past few years and its competitors' fitful retreat." It suggests that several "bigger-picture factors" distinguish Goldman and "explain why its shares have outpaced those of J.P. Morgan Chase and Morgan Stanley with a 40 percent gain the past 12 months." The differentiating factors include:
So what do you think? For more: Related articles: Read more about: Goldman Sachs 4. Banks exit foreclosure proceedings
Strategic defaults by underwater mortgage holders have been a big issue during the foreclosure crisis. Are banks guilty of similar practices on the flip side? CNBC reports that, "Thousands of empty, foreclosed properties dot streets. A growing number of these homes, however, are not actually foreclosures. The borrowers still own them, whether they know it or not." The reality is that for many banks, going through with an actual foreclosure will cost them more than essentially giving the property away, which is about to happen. Under a settlement signed last February, the nation's five largest mortgage servicers agreed that if a bank chooses not to pursue a foreclosure, it then must notify the borrower of the decision to release the lien and notes that the borrower has the right to the property. "In other words, the bank eats the mortgage, and the borrower owns the home free and clear. These rules started last October." This is quite a deal for some people, who have been essentially squatting in their own homes hoping for something like this. This may not clean up blighted neighborhoods overnight, however. I'm betting that there will be lots of cases in which the home remains vacant because the servicer has no idea how to contact the mortgage holders to tell them the good news: they still own the house. What might happen is that the bank and borrower will both disavow the home, leaving it to languish. For more: Related articles: Read more about: mortgages, Foreclosures 5. New Goldman Sachs CFO makes debut
Goldman Sachs will mark the end of an era when it reports earnings on Wednesday. It will be the last earnings release overseen by outgoing CFO David Viniar, who had built himself into quite an institution on Wall Street. He held the job for 12 years, which is an eternity on Wall Street. No other big bank CFO is even close to such tenure. Had Viniar or CEO Lloyd Blankfein left any earlier, it would have raised issues about the stability of the bank. But the bank has returned to relative calm, and the time for a transition is ripe. The incoming CFO, Harvey Schwartz, certainly has some big shoes to fill, and those shoes will not be far. Viniar will join the Goldman Sachs board upon his retirement. The company has every intention of getting its new CFO off to a good start, and we'll be seeing more positive articles in the near future. Reuters gets things started noting that "interviews with Goldman executives who know the incoming CFO give insights into why the bank picked him for the job and what he may do with it. In many respects Schwartz is like Viniar, the executives said. Schwartz is a capable risk-manager who is expected to maintain Viniar's cautious stance on risk-taking. They said Schwartz understands the nitty-gritty of complex finance and is also able to speak in plain English in front of investors and clients. He already commands respect within the firm and is beginning to build a following outside, having met with investors and analysts dozens of times over the past year, they said." His formal debut was shceduled for February 12 at a conference in Miami. But oversaw the recent earnings conference call with analysts. We wish him well in an extraordinarily hard job. For more: Related articles: Read more about: Goldman Sachs Also Noted
SPOTLIGHT ON... Raymond James ends commissions for product sales One of the longest-running controversies in the brokerage business concerns the often-hefty commissions that brokers gain when they sell certain products. Too often in the past, these payouts were not disclosed to end customers, who really truly thought brokers was pushing the product because they thought it was the right thing to do. Raymond James has joined others in moving away from this product-specific model in favor of a total commissions model. Article Company News:
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Friday, January 18, 2013
| 01.18.13 | Did Goldman Sachs regain it's edge?
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