Weekly Financial Biz Recap: Banks Need a Plan B, Foreclosure Auctions Trending

Here’s your Cheat Sheet to the week of top financial business headlines:

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Wells Fargo & Co. (NYSE:WFC) and U.S. Bancorp (NYSE:USB), among the United States’ top banks, are in the best positions to return capital to shareholders through repurchases in the current year and the next, says Credit Suisse. In a similar vein, analysts are looking forward to presentations by Citigroup Inc. (NYSE:C), JPMorgan Chase & Co. (NYSE:JPM), and Bank of America Corporation (NYSE:BAC), at Monday’s Barclays Financial Services Conference.

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A Goldman analyst team says that banks should have a “Plan B”. Prescriptions for some of the top companies include: Citigroup Inc. (NYSE:C) should spin off its real estate assets in North America, plus write off deferred tax assets; Morgan Stanley (NYSE:MS) needs to reduce its fixed income assets, and use the proceeds to repurchase shares. Bank of America Corporation (NYSE:BAC), Zions Bancorporation (NASDAQ:ZION), and Regions Financial Corporation (NYSE:RF): little growth seen, so reduce costs, divest certain divisions, and return the proceeds to shareholders.

Chief Financial Officer Bruce Thompson of Bank of America Corporation (NYSE:BAC) says that his company is still at odds with Fannie Mae, as he addressed the Barclays Financial Services Conference. Thompson contends that BofA’s exposure to mortgages is mostly quantified, but a majority of the Conference participants point to government-sponsored enterprise repurchase risk as their main obstacle to buying the stock.

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Ongoing economic problems in the British and European regions, are prompting Moody’s to stay negative on banks in the United Kingdom, as the agency comments that such companies as Lloyds Banking Group plc (NYSE:LYG), The Royal Bank of Scotland Group plc (NYSE:RBS), and Barclays PLC (NYSE:BCS) might be impacted by high regulatory costs arising from the various scandals and write-downs on their exposure to foreign real estate.

Perella Weinberg has evaluated Morgan Stanley Smith Barney at under $15 billion, which marks a win for Morgan Stanley (NYSE:MS), according to The New York Post. A valuation of $15.5 billion would have split the difference between how Citigroup and Morgan Stanley had separately appraised the venture. The exact figure is being widely bounced around, but one source believes that an appropriate guesstimate would be between $10 billion and 15 billion.

Wells Fargo & Co. (NYSE:WFC) shares moved down modestly as Chief Financial Officer Tim Sloan predicted that the currently narrow net interest margin could slip further in the third quarter, as higher yielding securities run off in he face of strong deposit inflows. Sloan’s comments were from the Barclays’ Financial Services Conference.

Shares of Legg Mason Inc. (NYSE:LM) take off on the news that Chief Executive Mark Fetting is leaving the building, as certain indications had it that he was helped through the door. Fetting assumed the position in January 2008, and proved effective at reducing costs, but it is now felt that different leadership is required as the company concentrates upon growth, says Chief Financial Officer Pete Nachtwey.

The underwriters in the United States Treasury’s 553.8 million share offering of American International Group Inc. (NYSE:AIG) have exercised their option to buy an additional 83.1 million shares, which takes the total proceeds for the government to $20.7 billion. Shares of AIG are up a small amount on the day, and have not fallen below the $32.50 offering price.

Another impediment is in the way of MetLife, Inc.’s (NYSE:MET) intentions to divest its banking division to the General Electric Company (NYSE:GE), as regulators are still questioning GE’s plans for the business. On Tuesday the FDIC met again to discuss the case, but no action was taken. The transaction originated in December, and was to have been finalized by now.

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Nomura Holdings, Inc.’s (NYSE:NMR) Americas equity head Ciaran O’Kelly is exiting the firm, according to a source, as Nomura seems to be sharply shrinking its equities division. Priorities have apparently changed since O’Kelly was hired back in 2009 to conduct the expansion of the unit with “a mandate to spend a lot of money.”

Shares of MGIC Investment Corporation (NYSE:MTG) fall, on word that the firm intends to defer an interest payment on $389.5 million of convertible debt until 2022. The move is allowed and frees cash, as MGIC continues to resolve litigation, and deal with losses, and regulatory action. The last time the firm deferred a payment was in 2010.

Upon approval by its board, Two Harbors Investment Corp. (AMEX:TWO) will spin off its portfolio of single-family properties to a newly formed real estate investment trust, Silver Bay Realty Trust, through which it will receive shares. For its part, Silver Bay has filed for an initial public offering and will purchase additional portfolios of single-family rentals.

Companies such as The Blackstone Group, L.P. (NYSE:BX), are participating more and more in foreclosure auctions. The new trend of Wall Street rushing into single-family housing is making the purchases of foreclosures for profit that much tougher, as if it were not already.

Mall operator General Growth Properties (NYSE:GGP) now estimates that its fiscal year 2012 FFO will be 96 cents per share, which is below consensus of 97 cents, according to its presentation at the Barclays Financial Services Conference. The firm says that plans for new store openings at its malls stand at a 4-year high, citing international retailers as especially strong.

JPMorgan Chase & Co. (NYSE:JPM) has initiated a reconfiguration of its corporate and investment banking business for the second time in the past three months, splitting the division between banking and market and investor services, says an internal memo. The longtime chief of the equities unit Carlos Hernandez will now lead Investor Services, which serves institutional investors.

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Top European banks that continue to maintain active business ties with Iran, include Deutsche Bank AG (NYSE:DB), HSBC Holdings PLC (NYSE:HBC), Banco Santander S.A. (NYSE:SAN), and ING Groep N.V. (NYSE:ING) according to a review by the Wall Street Journal, which also shows that some of the companies have been forced to pay huge fines for their actions. Banks still handle billions of euros in long-term contracts, but several say that they are not seeking business and are attempting to conclude their existing relationships.

The $1.6 billion in client cash that became missing at the time that MF Global Holdings Ltd. (MFGLQ.PK) collapsed was the subject of a meeting between the Department of Justice and Jon Corzine last week, according to the Wall Street Journal. Meanwhile, the former company’s assistant treasurer Edith O’Brien refuses to talk unless she receives immunity from prosecution.

Even though Citigroup Inc. (NYSE:C) has a credit card division that is alone worth $60 billion, the entire bank’s value is estimated at $97 billion, according to the former Morgan Stanley (NYSE:MS) Chief Executive Phil Purcell, who still campaigns for the breakup of the big banks, and adds that, if the banks trade at half of book value, but possess business lines that would bring two to three times book, it’s a no-brainer: “The shareholder is getting cheated.”

Mortgage real estate investment trust sector stocks such as American Capital Agency Corp. (NASDAQ:AGNC) and Annaly Capital Management, Inc. (NYSE:NLY), are on watch following the Federal Reserve’s stimulus announcement of $40 billion per month in mortgage-backed securities purchases. Agency REITs are more difficult, as the resulting higher mortgage-backed securities prices will improve book values, but the lower rates should increase prepayment risk.

The Royal Bank of Scotland Group plc (NYSE:RBS) will divest 25 percent of its Direct Line insurance division in a London initial public offering as part of the terms of its £45.5 billion bailout in 2008. Analysts calculate that Direct Line could be valued at £3 billion, but the signs aren’t promising, subsequent to the Geman insurer Talanx this week abandoning its IPO for the second time in three months over a dispute with potential investors over price.

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Chimera Investment Corporation (NYSE:CIM) gets a 4-month extension for continued listing on the New York Stock Exchange, giving the firm until January 2013 to comply with the rules and also to file its 2011 annual report. Chimera sacked its auditor in 2011 and thus far has not filed any 2012 quarterly reports as well.

NYSE Euronext (NYSE:NYX) will pay a $5 million penalty to the Securities and Exchange Commission to resolve charges that technology glitches at the exchange gave high-frequency traders stock-price data seconds before the general public received them.

JPMorgan Chase & Co. (NYSE:JPM) shares have now erased the decline of as much as 24 percent that resulted from the firm’s famous multibillion-dollar trading loss. On Thursday, the shares rose by 3.7 percent to $41.40, passing the $40.74 May 10th closing price when a trading loss of approximately $2 billion (then) was announced. The total amount of the loss this year currently stands at $5.8 billion, according to Bloomberg.

The Securities and Exchange Commission has sent subpoenas to investment firms which were present at a meeting in July 2008 that inquired as to whether the attendees traded on the information that the then-Treasury Secretary Henry Paulson shared, according to the Wall Street Journal. The pertinent information now includes a possible suggestion on Paulson’s part that the government was willing to rescue Fannie Mae (FNMA.OB) and Freddie Mac (FMCC.OB). The meeting participants included GSO, which is now part of The Blackstone Group L.P. (NYSE:BX), and Taconic.

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