Weekly Financial Biz Cheat Sheet: European Banks Ignite, Stocks Up 6.68%
UBS Inc (NYSE:UBS) reported its third quarter net profit dropped 39 percent to $1.02 billion Swiss francs ($1.13billion) but exceeded analysts’ forecasts of $276 million francs. The quarter’s revenue was $6.41 billion as compared to $6.66 billion from the previous year. The company’s net profit benefited from a $1.765 billion franc gain on the value of UBS’s debt but was affected by the firm’s $2 billion loss from unauthorized trades.
Deutsche Bank (NYSE:DB) saw a EUR $777 million ($1.1 billion) profit in the third quarter vs. a EUR $1.2 billion loss from the previous year. This beat a EUR $425 million forecast. Net revenue jumped 47 percent to EUR $7.3 billion, but it was flat without the firm’s Postbank charge. Current challenges include a bank exposure of EUR $4.79 billion of sovereign debt from the troubled countries of Greece, Italy, Spain, Ireland and Portugal.
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The UK’s Financial Services Authority fined Credit Suisse (NYSE:CS) UK Limited $5.95 million pounds ($9.5 million) for suitability issues from the sale of “structured capital-at-risk products.” The regulatory agency found the firm did not adequately assess customers’ attitudes toward risk and it failed to furnish reasonable evidence that the product was suitable for a customer and to effectively monitor staff. Credit Suisse will review whether customers may receive compensation.
The financial sector (NYSE:XLF) is having a bad day. Regional banks (NYSE:KRE) are dropping including Regions Financial Corporation (NYSE:RF) and Zions Bancorp (NASDAQ:ZION) along with the asset managers T.Rowe Price Group Inc (NASDAQ:TROW) and Franklin Resources (NYSE:BEN), after quarterly earning reports reflected customer and investor strains. Not to be excluded from today’s gloomy party are these Dow financials: Bank of America (NYSE:BAC), JPMorgan & Chase (NYSE:JPM), The Travelers Companies (NYSE:TRV) and American Express Company (NYSE:AXP).
The new hot spot for Wall Street Bankers may be regional banks including KeyCorp (NYSE:KEY), Fifth Third (NASDAQ:FITB), SunTrust (NYSE:STI), and US Bancorp(NYSE:USB). With the financial industry still seeing job and pay cuts, these banks aren’t feeling the pain as build up their investment banking departments.
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Ex-Goldman Sachs Group Inc. (NYSE:GS) director and McKinsey chief Rajat Gupta surrendered to the Federal Bureau of Investigation. He faces charges of leaking insider information to Raj Rajaratnam, the co-founder of Galleon Group who was recently sentenced to 11 year in prison for insider trading. Gupta’s case will pose a different challenge for the government’s case as he didn’t make any money from his actions while Rajaratman made millions.
MF Global Holdings Ltd. (NYSE:MF) reported disappointing third quarter earnings on Tuesday and saw its stock tank 48 percent. Today, the firm said it will explore strategic options including selling to another company, pursuing mergers or participating in other alternatives including asset sales. Adding to the stock’s shaky price is investors’ concerns about the firm’s $6 billion exposure to Europe’s sovereign debt.
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MetLife, Inc.’s (NYSE:MET) stock dove after the Fed rejected its proposed plan to increase the company’s dividend and share repurchase. The could have led to an embarrassment by the company and now it may time for MetLife to quickly exit from banking. This could take awhile, some analysts believe, but it’s one action worth taking for the company.
The State of Masschusetts filed a civil suit against the Bank of New York Mellon Corporation (NYSE:BK) over foreign exchange trading fees. This isn’t the first time the bank has been in trouble for this. New York State and the Justice Department also filed suits against the bank earlier this month for giving bad prices to customers and allegedly ripping them off.
Bank of China Ltd. plans to will issue American Express Co. (NYSE:AXP) credit cards to its private clients. The cards will come with a ”fast-track” service and other perks. Lucky for American Express to breakthrough and add the customers: Visa Inc. (NYSE:V) and MasterCard Incorporated (NYSE:MA) have attempted to enter into this fast-growing area but didn’t have any luck.
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European banks (NYSE:KBE) bolted out the gates at the market open from news of the eur0-zone agreement. Sector stocks enjoying the run included Deutsche Bank AG (NYSE:DB), Barclays PLC (NYSE:BCS), and Royal Bank of Scotland Group plc (NYSE:RBS).
Even without their direct exposure to the contentious Greek bonds, U.S. bank stocks celebrated the euro-zone’s debt deal from the European banks’ momentum and soaring stock prices. Stocks joining the party included Financial Select Sector SPDR ETF (NYSE:XLF), Bank of America Corporation (NYSE:BAC), Citigroup Inc.(NYSE:C), JPMorgan Chase & Co. (NYSE:JPM) and Morgan Stanley (NYSE:MS).
MasterCard Incorporated (NYSE:MA) and regional bank Huntington Bancshares Incorporated (HBAN) announced a deal that has Huntington converting its debit card program over to MasterCard and upgrading its customers to a MasterCard-brand Platinum debit card; this will replace its current 1.5 million Visa (NYSE:V) debit cards. The conversion is expected to be completed by Nov. 1.
JPMorgan Chase (JPM) recently approached the Fed about a potential share buy back but received a discouraging response to do so; the bank subsequently dropped it. The opposition shows a cautious regulatory stance with bank capital requirements. While banks are looking to use spare cash to make shareholders happy, regulators are saying not so fast with the buyback and dividend requests.
American International Group (NYSE:AIG) announced plans to sell about half its stake in pan-Asian life insurer AIA in the next few weeks. When its one-year lockup expires this week, AIG will only be allowed to sell a secondary offering of approximately $6 billion of AIA shares in Hong Kong. Sale proceeds will help the company pay its government bailout debt and rid the company from some volatility on its books.
JPMorgan Chase (NYSE:JPM) conducted eight months of consumer testing and has decided it won’t add the controversialdebit-card fee on its customers. After Bank of America (NYSE:BAC) caused a stir with a new monthly $5 fee, Chase has joined other big banks including U.S. Bancorp (NYSE:USB), Citigroup Inc. (NYSE:C), PNC Financial Services Group Inc. (NYSE:PNC) and KeyCorp (NYSE:KEY) in deciding against it. However, it’s not necessarily because of pressure from Bank of America’s action. David Bowen who runs Key’s consumer product business said, “We looked at all options and quickly decided it didn’t fit with our overall strategy.”
MetLife, Inc. (NYSE:MET) announced plans to offer lower return rates on sales of it products in response to low interest rates in its investment portfolio. The firm will adjust terms on its client offerings, reallocate its investment portfolio holdings and hedges to protect the company from the market’s current low interest rates.
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MF Global Holdings Ltd. (NYSE:MF) stock continues to tank after it reportedly exhausted its revolving credit lines, valued at $1.3 billion earlier in the week. Looking for a lifeline, MF is in “advanced negotiations” to sell the firm to a small group of bidders, according to a CNBC report. The firm is hoping a deal can be reached either by Monday or possibly sooner.
Goldman Sachs Group Inc. (NYSE:GS) received an upgrade to Buy and an increased price target from $115 to $1135 by Rochdale Securities analyst, Dick X. Bove. It’s an analyst’s prerogative to change his mind: In May, Bove cut Goldman’s rating to a Sell and lowered its price target to $120 from $163. Why the change of heart? Bove believes Goldman has aired all of its bad news.
Not so fast Mr. Bove. Goldman (NYSE:GS) has been slapped today with a lawsuit in NY state court by Australia’s Basis Yield Alpha Fund for its investment in the Timberwolf CDO. The $1.07 billion suit alleges that the investment bank sold risky debt with the expectation its value would dive in value to an Australian hedge fund, causing insolvency. The suit alleges “fraud, breach of contract and negligence.”
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