Search

The article reports the the cost of insuring against default the sovereign debt of several nations including Ireland and Spain reached record highs as the European Union released guidelines for future bank bailouts that call for bondholders in the banks to sustain losses. Investors in European government securities apparently fear they could eventually be forced to absorb losses as well.

The article discusses the difficulty European banks are experiencing in obtaining loans. Recently introduced restrictions on money market funds coupled with concerns stemming from a European debt crisis have made creditors wary about lending to banks. Rates banks pay for interbank loans and commercial-paper funding have both risen.

The article discusses benefits enjoyed by financial companies that have participated in a U.S. Federal Deposit Insurance Corp. program that guarantees new debt. The publication estimates that firms such as General Electric Co. and Citigroup Inc. will save around $24 billion in borrowing costs. The program has allowed Goldman Sachs Group Inc. to save over $200 million per quarter in financing costs.

The article reports on the plan of credit-ratings firms to delay the issuance of credit-rating downgrades to the largest U.S. banks as a result of new financial regulation passed by the Senate in May 2010.

The article reports on the plan of ratings agency Standard & Poor's to delay bank downgrades for major banks in the U.S. in response to the passage of a financial-overhaul bill in the Senate.

The article reports on the move of Fitch Ratings to downgrade the credit ratings of China Citic Bank Corp. and China Merchants Bank Co. amid worries over a surge in lending in the country in 2009 that has exposed banks to potential bad loans.

The article discusses the U.S. Treasury Department's sale of government securities. Demand for two-year notes should be strong among banks with ample cash on hand. Auctions for ten-year notes could temporarily drive interest rates upward, before bargain hunters appear to drive them back down. Interest rates on government debt are not likely to rise until banks start making more private loans and buying fewer Treasury notes.

The article discusses prospects for shares of U.S. bank stocks. Since early March of 2009 an index of bank stocks has risen over 150%. However, influential analyst Meredith Whitney now considers bank shares to be fairly priced. Losses on credit cards and commercial real-estate loans could weigh on the shares of small and regional U.S. banks.

The article reports on the plan of the Federal Deposit Insurance Corp. (FDIC) to wind down its debt-guarantee program that was launched in 2008. The plan will test the ability of the U.S. banking sector to recover from the financial crisis without government assistance. The FDIC can either terminate the program on October 31, 2009 or extend it for another six months for emergency purposes.

The article discusses earnings for Bank of America Corp. and Citigroup Inc. Second quarter results in 2009 for both firms are expected to reflect improvement over the year-ago period. However, both are also susceptible to further credit losses, especially if unemployment and debt defaults continue to increase.

The article discusses the stock market. Although shares have risen sharply amid a current bull market, corporate earnings may need to start showing improvement before stocks rise much higher. A troubled banking sector and frugal consumers could exert downward pressure on earnings, though. John Truschel of Boston Company Asset Management does not believe earnings will rebound strongly any time soon.

The article discusses banks in the U.S. Morgan Stanley, Goldman Sachs Group, and Wells Fargo are among firms that have reported strong results for the first quarter of 2009. However, the International Monetary Fund believes U.S. banks may need to raise at least $275 billion in additional capital. The cost of protecting against the default of some bank debt has risen substantially.

The author opines on the U.S. government's Term Asset-Backed Securities Loan Facility (TALF), aimed at stimulating demand for various types of asset-backed securities. In the author's view TALF is a cyclical solution to a secular problem. He believes TALF's failure to address troubled assets on the balance sheets of banks and consumers will limit its effectiveness.

The article discusses the impact on Wells Fargo's balance sheet of its acquisition of Wachovia. Prior to the deal Wells Fargo's ratio of tangible common equity to tangible assets hovered near minimal acceptable levels. In the aftermath of its Wachovia purchase, that ratio may have fallen sufficiently to compel the bank to eventually raise more capital.

The article discusses a quarterly earnings report to be issued by J.P. Morgan Chase & Co. on January 15, 2009. Although the bank has performed relatively well during a global economic recession, many analysts expect that the bank broke even at best for the most recent quarter. Investors will pay careful attention to remarks from chief executive Jamie Dimon for any sign of improvement in the banking industry.

The article discusses the U.S. government's $700 billion plan to bail out the financial industry. In two months the plan has evolved from an initiative to buy banks' impaired assets to an effort at injecting capital into those institutions. After Treasury Secretary Henry Paulson announced the government would not buy banks' assets, the cost to insure those assets rose sharply in price.

The article discusses prospects for the stocks of large U.S. banks. Bank of America reported poor earnings for the third quarter of 2008, and J.P. Morgan Chase & Co., Citigroup Inc., and Wells Fargo are likely to do the same. Jason Trennert of Strategas Research Partners believes bank stocks could take longer than usual to recover from recessionary conditions.

The article discusses the uneven response to date by nations confronting a global financial crisis. Although the U.S. government has acted to stem the crisis and economists in the U.K. have proposed a concerted effort among nations to pump capital into the global banking system, collective action has been largely lacking.

The article discusses credit-card debt in the U.S. Amid declining economic conditions credit-card debt has continued to grow, as consumers increasingly use their cards for everyday expenses. With credit-card delinquency rates on the rise, though, some banks are trying to impose higher interest rates and harsher credit terms.

The article discusses the nature of earnings reports issued for the second quarter of 2008 as of July 28, 2008. Results suggest that companies in the Standard & Poor's 500 index will see earnings per share fall an average of 17.9%. Bank earnings have been particularly weak, while energy companies have reported strong profits.

The article presents an evaluation and forecast for the banking industry. The collapse of the U.S. housing bubble and the subsequent financial crisis caused by securitized loans means that commercial banks are likely to grow larger in 2008 and beyond. Banks will be forced to hold more of the value of the loans they make on their balance sheets. This will raise their capital requirements and lower profits.

The article comments on the implications for banks of a steepening yield curve. In early March of 2008 a 1.9 percentage-point gap existed between the yields of two-year and ten-year U.S. Treasury notes, the largest such gap since June of 2004. Banks stand to benefit, as they typically borrow at (lower) short-term rates but lend at (higher) long-term rates.

The article discusses bank dividends. Dividends paid during 2006 exceeded the total of write-downs banks took in connection with credit problems. In response to diminishing capital levels several banks have cut their dividends, including Citigroup. Lower dividends aren't popular with investors, but banks may wish to conserve cash against the possibility of further write-downs.

The article reports that investors' concerns over the indebtedness of banks in Portugal and Spain caused bond prices in both nations to fall. Also worrying investors was an attack by North Korea on an island in South Korea. The Dow Jones Industrial Average lost over 142 points and the euro declined against the U.S. dollar.

The article reports that European banks are issuing much less commercial paper to secure short-term funding and issuing fewer loans. Over a two-month period outstanding commercial paper from Banco Santander SA and Millenium BCP has declined by about $1 billion apiece. In addition, bank deposits that might otherwise be available for loans have begun piling up at the European Central Bank.