Weekly Financial Biz Cheat Sheet: Stocks Up 5.1%, Bank of America Takes Heat

Citigroup Inc.’s (NYSE:C) third quarter earnings report included a net income of $3.8 billion ($1.23 earnings share), a 74 percent rise year over year and 13 percent above the previous quarter’s earnings. The company’s $20.8 billion revenue represented a slight increase from the prior year and the second quarter of 2011. In addition, Citigroup reported that it will move its retail partner cards and a majority of its assets from Citi Holdings into Citicorp. This will be completed by year’s end.

Capital One (NYSE:COF) reported a 3.65 percent rise in 30-day credit card delinquencies in September from August’s 3.43 percent. After seeing earlier improvements, it’s been two consecutive months of declining credit. On a positive note, the company saw a drop in charge-offs to 3.9 percent in September vs. August’s 4.1 percent.

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Sun Life Financial (NYSE:SLF) faced a tough third quarter and reported a preliminary loss of $621 million (a $572 million loss on an operating basis). The losses stemmed from large declines in the equity markets and interest rate levels, affecting its individual life and variable annuity businesses.

Charles Schwab Corporation (NYSE:SCHW) saw a 77 percent rise in net income for the third quarter of $220 million as compared to $124 million from the previous year. However its third quarter revenue of $1.18 billion, a rise of 11 percent year over year and $0.18 earnings per share missed analysts’ forecasts by $10M and $0.01, respectively. The market responded by dumping the stock.

Investing Insights: Charles Schwab Earnings Cheat Sheet: Positive Earnings Streak.

After Citigroup’s (NYSE:C) and Wells Fargo’s (NYSE:WFC) reported their third quarter earnings, the market reacted with swelling bank CD spread prices. Goldman Sachs(NYSE:GS) saw a 22bps rise, Morgan Stanley’s (NYSE:MS) jumped 21bps, and Bank of America (NYSE:BAC) had an 18bps increase.

Deutsche Bank’s (NYSE:DB) foray into “casino banking” in Las Vegas is proving to expensive and not such a great idea. Its investment is now equal to its holdings in the Eurozone debt crisis. The bank’s Vegas holdings include the $3.9 billion, 3,000-room Cosmopolitan casino, a $1 billion balance from debt and a 25 percent equity holding in Station Casinos. On the other side of the pond, the investment parallel’s the bank’s $5.1 billion exposure in countries hard hit by the Eurozone debt crisis: Ireland, Italy, Greece, Portugal and Spain.

Bank of America’s (NYSE:BAC) third quarter better than expected earnings of $0.56 per share came from three areas. Almost half, $0.25, was from the sale of China Construction Bank with the balance coming from debt valuation adjustment ($0.12), and reserve release (0$0.12). The bank’s core earnings weren’t that much higher than zero.

Goldman Sachs (NYSE:GS) third quarter losses included a number of declines. Its ibanking revenue dropped 33 percent year over year with help from its 61 percent underwriting decline. Investing and lending contributed a negative net revenue of $2.48B and the company’s compensation fell 59 percent. Where has Goldman Sach’s money gone in the last few quarters? Prop trading has been a good source with of $1-$3 billion in profits; however, it followed the company’s overall third quarter decline with a $2.5 billion loss from the company’s investment and trading volume decline.

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Bank lending isn’t dead says Wells Fargo (NYSE:WFC) CFO Timothy Sloan. In an interview, Sloan said that “The narrative that banks aren’t lending is incorrect. Lending is strong, and based on what we’re seeing,  it will continue to grow.” In the third quarter, Citigroup (NYSE:C), Wells Fargo and JPMorgan Chase (NYSE:JPM) saw loan growth in almost all of their businesses; however, Bank of America (NYSE:BAC) reported a 1 percent in loan declines.

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Morgan Stanley (NYSE:MS) continues to struggles with bond position missteps. After overhauling its bond hedges from a large exposure to bond-insurance companies, the firm saw a $471 million gain in the second quarter; however, it may continue to haunt them. Analysts have predicted a $200 million loss from the positions will show up when the Morgan Stanley reports their third quarter earnings on Wednesday.

S&P downgraded a number of Italian banks (NYSE:KBE) due to deteriorating conditions. The rating agency cut 24 of 43 banks and said that it did not believe “that this difficult operating environment is transitory or that it will be easily reversed.”

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Morgan Stanley’s (NYSE:MS) strong third quarter earnings of $1.14 included a $1.12 debt valuation adjustment – DVA. This accounting gain comes from a bank’s widening credit spread. This inverse relationship is tough to come by: the worse the environment, the larger the gain.

Visa’s (NYSE:V) board of directors declared a 47 percent rise in its quarterly dividend from $0.15 per share to $0.22 per share . It’s payable on December 6, 2011 to all holders of record. With this quarterly rise, the company’s annual dividend rate jumps to $0.88 per share from $0.60 per share.

Investing Insights: Will Weak Bank Earnings Force Investors into Gold?

Citigroup Inc. (NYSE:C) will pay a $285 million settlement fine for charges brought against them by the Securities and Exchange Commission. The regulatory agency alleged that the firm’s Citigroup Global Markets group misled investors from a structured and marketed $500 million collateralized-debt obligation that was backed by subprime loans. Citigroup then bet against these products but failed to inform investors.

While signals from the European Commission suggest that a debt crisis solution is moving forward with possible bank recapitalizations, European and UK banks aren’t so confident.Barclays (NYSE:BCS), Bank of Ireland (NYSE:IRE) and Santander (NYSE:STD) all saw their stocks dip lower on continuous worries from their minor exposure to the euro-zone debt.

Don’t Miss: 4 Bank Stocks Bucking the Downward Trend.

Wells Fargo Co. (NYSE:WFC) may see higher profits in the U.S. mortgage market as rivals leave the space. In the third quarter, the bank initiated $89 billion in mortgages, surpassingJPMorgan Chase & Co’s (NYSE:JPM) $37 billion and Bank of America Corp’s $33 billion combined numbers.

Bank of America (NYSE:BAC) has struggled with a rash of bad news over the past few months. In recent actions including Fannie Mae taking out loans from the bank, moving derivatives from Merrill Lynch to its lead bank and integrating parts of the subsidiary into the bank units, it may suggest a bigger agenda: a possible Chapter 11 filing.

Super Hot Feature: Is Bank of America About to Go Bust?

Fifth Third Bancorp (NASDAQ:FITB) reported strong third quarter earnings and jumped to the top of  the S&P 500 indexand the financial sector today. Along with with its 60 percent profit, the company also said that it didn’t have any exposure to the European debt crisis.

Citigroup’s (NYSE:C) $285 million settlement with the Securities and Exchange Commission pales in comparison to Goldman Sach’s (NYSE:GS) $585 million settlement from last year. The two cases were similar and for Citigroup, it may be a good example that it’s good to be sued later than earlier. Timing may be everything.

KeyCorp (NYSE:KEY) third quarter earnings beat estimates, helping its stock rise today. The bank reported solid growth for the second consecutive quarter in its commercial, financial and agricultural loan portfolios. Adding to the strong report was bottom line margin improvements, which increased three percent from declines in non-interest expenses, decreased credit costs and fewer loan charge-offs with improved asset quality.

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Last year’s Nasdaq (NASDAQ:NDAQ) cyber attacks appear to be more serious than the exchange had initially said in February. New information shows that hackers installed software and spied on the board directors of publicly-held companies. The exchange said they did not have evidence the hackers accessed client data; however, it is uncertain what information had been taken. The investigation continues.

SunTrust Banks, Inc (NYSE:STI) reported a third quarter earnings per share of $0.39 per share vs. $0.33 per share in the second quarter of 2011; year over year, earnings was $0.17 per share. Revenues for the quarter was $2.19 billion as compared to $2.24 billion from the same time period last year. This beats estimates by $0.03 on earnings per share and revenue by $70 million.

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MGIC Investment Co. (NYSE:MTG) saw a larger-than-expected $165 million ($-0.82 earnings per share) third quarter loss. This compares to a $51 million loss (-$0.26) from the same time period a year ago. The company also reported a 12 percent revenue loss to $337 million with declining net premiums.

Since 2007, the five largest U.S. mortgage lenders have seen nearly $69 million in expenses from sinking home loans. This isn’t over yet and the number could rise to $120 billion. Bank of America (NYSE:BAC) has$40.3 billion in expenses with JPMorgan Chase & Co. (NYSE:JPM) at $17.6 billion.

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Capital One’s (NYSE:COF) stock jumped after the company beat estimates for its third quarter earnings per share and revenue. It also saw an uptick in net interest margin to 7.39 percent from 7.21 percent in the previous quarter. In a conference call today, the company said it’s on track with its ING Direct (NYSE:ING) acquisition for either late 2011 or early 2012 and in the second quarter of 2012, a completed purchase of the HSBC credit card business.

Investing Insights: Capital One Financial Earnings Cheat Sheet: Third Straight Quarter of Rising Profit.