Financial Industry 01 (Jul 08 - Aug 09)

[winston]

DJ MARKET TALK: Positives Continue To Stack Up For China Bks-Citi

0851 [Dow Jones] "Positives continue to stack up" for Chinese banks, says Citigroup, citing strong loan growth, favorable policy. Says NIMs mostly bottomed in April, most banks expect some recovery due to improving loan mix, downward repricing of time deposits; "we view NIM risks as increasingly skewed to the upside" also due to buoyant A-share market (positive deposit mix shift, IPOs to cause short-term tightening of interbank/repo rates), possible rate hike expectations going into 2010.

House tips top picks as China Construction Bank (0939.HK), ICBC (1398.HK), Citic Bank (0998.HK), target prices HK$7.30, HK$6.30, HK$5.50 respectively. CCB best performing yesterday, +3.0% at HK$5.85

[winston]

It's Fun to Know: The Learjet Repo Industry

If you fall too far behind on your car payments, you're likely to get an unwelcome visit from your friendly neighborhood "repo man." Turns out there are similar services that specialize in repossessing such things as corporate jets, commercial airliners, and yachts owned by bankrupt charter airlines, former millionaire investment bankers, and others.

As with cars, these specialists must use a certain degree of discretion (i.e., expert-level sneakiness) to get the job done. In addition, they need ocean navigation skills; familiarity with flying several different types of aircraft; contacts with local airports, ports, and government officials; mechanical knowledge; and more.

(Source: Salon)

[blid2def]

Anyone surprised? This idea (consumer financial products regulation/approval) was mooted by Shiller in his book "Subprime Solution" (I don't know if anyone mentioned it before him). He compared the importance of the regulation of consumer financial products to that of the oversight over medication, food, toy safety, etc.

Banks Balk at Agency Meant to Aid Consumers
http://www.theledger.com/article/200907 ... -Consumers

[winston]

Never have much respect for the Research Materials from UBS. However, I kinda agree with this piece which makes me start to wonder. ..

DJ MARKET TALK: UBS Downgrades H-Shr Bks; Growth To Slow From '10

0949 [Dow Jones] STOCK CALL: UBS says H-Share banks' growth to slow from 2010; "Based on expected lower GDP growth, a weak trading surplus and more active financial asset allocation by depositors, H-share banks' deposit growth could slow from 28% in 2009E to 15% in 2012E." Notes, 30% of Chinese banks' deposit growth has been driven by country's trade surplus.

Estimates mild credit cycle will push H-share banks' 2009-12 average credit cost to 103 bps (2004-08 average of 71 bps), ROAA may fall from 1.19% in 2008 to 1.02% in 2012E on 14% 2008-12E profit CAGR (32% in 2004-08).

Downgrades China Construction bank (0939.HK), Citic Bank (0998.HK), China Merchants Bank (3968.HK) to Neutral from Buy; cuts Bank of Communications (3328.HK) to Sell from Neutral. Lowers sector earnings forecasts aggregate 8% in 2011 after assuming credit costs will peak in 2011. Adds, "as the global economic outlook is uncertain, the credit cycle could be more severe than our base-case scenario.

[winston]

As long as his intention is ok ...

Would you pledge your soul as loan collateral?

RIGA (Reuters) - Ready to give your soul for a loan in these difficult economic times? In Latvia, where the crisis has raged more than in the rest of the European Union, you can.

Such a deal is being offered by the Kontora loan company, whose public face is Viktor Mirosiichenko, 34.

Clients have to sign a contract, with the words "Agreement" in bold letters at the top. The client agrees to the collateral, "that is, my immortal soul."

Mirosiichenko said his company would not employ debt collectors to get its money back if people refused to repay, and promised no physical violence. Signatories only have to give their first name and do not show any documents.

"If they don't give it back, what can you do? They won't have a soul, that's all," he told Reuters in a basement office, with one desk, a computer and three chairs.

Wearing sunglasses, a black suit and a white shirt with the words "Kontora" (office) emblazoned on it, he reaches into his pocket and lays out a sheaf of notes on the table to show that the business is serious and not a joke.

Latvia has been the EU nation worst hit by economic crisis.

Unemployment is soaring and banks have sharply reduced their lending, meaning that small companies offering easy loans in small amounts have become more popular.

Mirosiichenko said his company was basically trusting people to repay the small amounts they borrowed, which has so far been up to 250 lats ($500) for between 1 and 90 days at a hefty interest rate.

He said about 200 people had taken out loans over the two months the business was in operation.

[kennynah]

no way his intentions are noble...to ask for someone's soul as collateral for a loan... creepy

[millionairemind]

Home > Breaking News > Money > Story
July 8, 2009
Too late to rescue banks
WASHINGTON - A GOVERNMENT plan designed to rid banks' books of the troubled assets that exacerbated the financial crisis will do little to address a fundamental weakness of the industry or the broader economy, analysts say.

The Treasury Department this week will announce the names of between five and 10 fund investment firms participating in the multibillion-dollar plan, according to two industry officials.
The plan, known as the Public-Private Investment Program, or PPIP, will leverage private capital with government subsidies so that these investment firms can buy up the soured mortgage-related assets that have clogged banks' balance sheets and made them reluctant to lend freely to businesses and consumers.

But since announcing the plan five months ago, the government has shelved part of it that would help these firms buy individual mortgages and other loans held by the banks. As a result, some analysts say its impact will be muted.

Fears of a deeper recession, including rising unemployment and falling home values, raise the spectre of massive defaults on consumer and commercial real estate loans, analysts said.

But the securities backed by mortgages and other complex assets to be targeted by PPIP are no longer as big a threat to the banking industry's stability, analysts said.

Ten of the nation's biggest financial companies - including JPMorgan Chase & Co, American Express Co and Goldman Sachs Group Inc - last month got the go-ahead to return US$68 billion (S$99.5 billion) in federal bailout money, a development viewed as evidence that the financial sector was beginning to stabilise after benefiting from the government's US$700 billion financial rescue fund.

Some of the PPIP managers are expected to include Blackrock Inc, Pacific Investment Management Co and TCW Group Inc, according to the two industry officials. Billionaire investor Wilbur Ross said on Tuesday that he would use up to US$1 billion to participate. -- AP

[winston]

'Banking crisis is over': Barclays chairman

LONDON - The chairman of Barclays PLC, Britain's second largest bank, reckons the country's banking crisis is over as financial institutions appear to have improved their financial position.

However Marcus Agius did warn that problems remained as the 'very nasty global recession' was likely to go on for a while yet.

'I keep looking for green shoots - I don't see many,' Mr Agius told The Associated Press in an interview. 'I think we are certainly off the bottom. I think the banking crisis is over. I think the government did well and other banks who haven't had government money have recapitalised themselves like we have and I think confidence is back that the banks aren't going to fail.'

'That's terrific because that wasn't so some months ago, but we do have a very nasty global recession and everyone has to react to it,' he added.

Last autumn, Barclays opted to raise funds from Middle Eastern investors instead of accepting a government bailout, which Royal Bank of Scotland Group PLC and Lloyds Banking Group PLC did. Many of Britain's banks had to shore up their capital bases amid mounting fears they would go under in the same way that US investment bank Lehman Brothers had earlier.

Though Britain's banks now appear to be in a more stable financial position - the stock market certainly thinks so - their earnings potential is being restricted by the deep recession. In the first three months of 2009, the British economy shrank by 2.4 per cent from the previous quarter - its biggest declines in 51 years.

And with house prices expected to fall over the rest of the year and unemployment apparently on the rise to 3 million, Britain's banks will continue to operate in a harsh economic environment for some time to come.

Mr Agius conceded that problems remain but that eventually things will improve. 'When that is, I don't know,' he said.

'Things are going to get better from here onwards, but how fast and how quickly I don't know.' Mr Agius said that the banking sector, which has faced criticism over its practices and bonus culture, will emerge stronger from the global economic crisis.

'The global financial crisis was a very traumatic moment for everybody,' Mr Agius said. 'A lot of people have had a chance to reflect deeply about the way the world operates and some good will come from it - I'm always an optimist.' -- AP

[winston]

DJ MARKET TALK: HK Banks' 1H Net Profit Likely Down 30% Y/Y -Citi

1018 [Dow Jones] Hong Kong banks 1H net profit likely down 33% on-year on lower net interest margin, fee income, contracting loan books, says Citigroup; but tips pre-provisions operating profit (PPOP) down only 15%, as non-performing loans more benign than expected. Sector results due early August.

House says 2H outlook remains "unexciting" on weak loan demand, margin, constrained wealth management sales due to tighter regulations post-Lehman mininbond problems. Adds, HK banks trading on average 10X 2010 P/PPOP, highest in region; keeps BOC Hong Kong (2388.HK) as sector top pick, on reasonable valuation (10.2X 2010 P/E), potential mortgage-backed securities writeback, yuan trade settlement beneficiary.

Recommends Sell for Hang Seng Bank (0011.HK), Wing Hang Bank (0302.HK), Bank of East Asia (0023.HK).

[winston]

Bair: Bank Failures Ahead 10 Times Worse By: Greg Brown

FDIC Chairman Sheila Bair is predicting that the bank failure rate will increase tenfold, according to a U.S. Senator.

Bair said up to 500 more banks could fail, Sen. Jim Bunning, R-Ky, said in a meeting, reported Dow Jones Newswires.

That would put the current crisis close to the level achieved during the late-1980s savings and loan crisis, when 745 thrifts were shut.

"She told us that unless something dramatic happens, we could lose up to 500 more banks," Bunning said.

"That means that people who make mortgages in local places .... people that could really help in a foreclosure will not be there," Bunning said.

Regulators recently shut down the Bank of Wyoming on Friday, the 53rd failure this year.

© 2009 Newsmax.

http://moneynews.newsmax.com/streettalk ... 36524.html