Wednesday, October 24, 2012

Capital One Earnings Review: Performance Soars!


Capital One reported QE September 2012 financial results on October 18

Capital One earnings per share soared to a strong $2.01 from a scant $0.16 in the prior quarter. The prior Q2 was wiped out by a variety of losses, expenses, settlements, reserves, amortization, and fines that to-date have been significantly accounted for and recognized. Financial performance therefore has rebounded while financial position and capital have remained very strong. Risk management appears very good.

At QE 9-30-12 I have rated Capital One an "A-" on a scale of A+ to G-. This is no change in the rating from the prior QE 6-30-12. The median rating is "D" and the average rating at QE 6-30-12 was "C". Financial position strength is weighted more than financial performance. The QE 6-30-12 bank ratings review is here.







"Capital One posted solid results across all of our businesses in the third quarter, including strong contributions from ING Direct and the HSBC U.S. credit card business," said Richard D. Fairbank, Chairman and Chief Executive Officer. "We are well positioned to sustain strong returns and capital generation, even in an environment with low industry growth and prolonged low interest rates."

$COF $XLF

Morgan Stanley Earnings Review: Downward Spiral


Morgan Stanley reported QE September 2012 financial results on October 18

Morgan Stanley reported a $956 million net loss resulting in a loss per share of $0.55. The operating loss was a quarter-busting $1.48 billion. This is the 3rd loss per share in the past 4 quarters, 4th in the past 6 quarters, and 5th in the past 9. This sums up overall financial performance or lack thereof. Financial position is weak and capital is marginal. Risk management is ineffective.

Morgan Stanley does this to themselves and to their clients. CEO James Gorman noted 3 quarters ago that MS continues "addressing a number of outstanding strategic and legacy issues." I guess that's one way to say it. Another way to say it is: we lie, cheat, and steal. The general public is not as familiar with Morgan Stanley as they are Goldman Sachs, JPMorgan, Bank of America, Citigroup, et al. in the Wall Street Banksters syndicate. They are just as criminally inclined if not more so.

At QE 9-30-12, I have rated Morgan Stanley an "E-" on a scale of A+ to G-. This is a downgrade from "E+" at the prior QE 6-30-12. The median rating is "D" and the average rating at QE 6-30-12 was "C". Financial position is weighted more than financial performance. The QE 6-30-12 bank ratings review is here.







James P. Gorman, Chairman and Chief Executive Officer, said, “Our third quarter results show a balanced, strategically focused franchise that has attained stronger revenues and executed on key goals. The rebound in Fixed Income & Commodities sales and trading indicates that clients have re-engaged after the uncertainty of the rating review in the previous quarter. We are beginning to unlock the full potential of the Global Wealth Management franchise, having increased our ownership of, and agreed on a purchase price for the rest of, Morgan Stanley Wealth Management. I am confident in our potential to enhance profitability and increase value for our shareholders in the quarters ahead.”

$MS $XLF

BNY Mellon Earnings Review: Multi-Year High!


BNY Mellon reported QE September 2012 financial results on October 17

CEO Gerald Hassell delivered a multi-year, if not all-time, high for earnings per share of $0.61. This is an impressive turnaround after the prior quarter was a disappointing $0.39, which included a litigation charge of $212 million after-tax or an $0.18 loss per share. The slow, long-term decline in financial performance was reversed this quarter. Financial position is stable with a strong capital position. Risk management appears very good.

At QE 9-30-12 I have rated Bank of New York Mellon a "B" on a scale of A+ to G-. This is no change in the rating from the prior QE 6-30-12. The median rating is "D" and the average rating at QE 6-30-12 was "C". Financial position strength is weighted more than financial performance. The QE 6-30-12 bank ratings review is here.







“We are pleased to report solid earnings growth this quarter, led by the strength of Investment Management, which recorded its twelfth consecutive quarter of long-term inflows. New business trends for Asset Servicing were also strong, as we recorded the best quarter in new AUC wins since 2008, a testament to the breadth and quality of our capabilities. We remain focused on reducing expense growth through our operational excellence initiatives. During the quarter we completed the client integration for our BHF Asset Servicing acquisition in Germany, an example of our progress in integrating systems and retiring legacy platforms,” said Gerald L. Hassell, chairman, president and chief executive officer of BNY Mellon.

$BK $XLF

US Bancorp Earnings Review: Stellar Performance!


US Bancorp reported QE September 2012 financial results on October 17

Talk about seeing opportunities instead of obstacles! CEO Richard Davis is your guy! Davis was able to push earnings per share, net revenues, operating income, net income, operating margin, net margin, capital ratio, and return on assets to record levels. Yet another stellar performance has firmly entrenched US Bancorp as the very best large USA bank. Of special note is the excellent net margin of 27.94%. I assume only bankers, analysts, auditors, examiners, and inquisitive shareholders get excited about stuff like this, so be it.

I have believed diminishing returns would ultimately cause a peak for US Bancorp earnings performance, but I have been proven wrong for at least a year. There's only so high financial performance can reach without expansion or acquisitions but US Bancorp continues to grind higher to new records. Risk management has proven excellent. Financial position and capital are very strong.

At QE 9-30-12 I have rated US Bancorp an "A" on a scale of A+ to G-. This is no change in the rating from the prior QE 6-30-12. The median rating is "D" and the average rating at QE 6-30-12 was "C". Financial position strength is weighted more than financial performance. The QE 6-30-12 bank ratings review is here.

In this rare instance, I'm going to shut up, not be a smart aleck and cynic, and defer to CEO Davis to do the talking (see below the charts). He obviously knows more than I do about management and banking. No hype here, Mr. Davis can back up what he says. Sheesh.







U.S. Bancorp Chairman, President and Chief Executive Officer Richard K. Davis said, “I am very proud to announce our Company’s third quarter results. U.S. Bancorp, today, reported record net income of $1.5 billion, or $.74 diluted earnings per common share, on record total net revenue of $5.2 billion. Once again, we achieved industry-leading performance metrics with returns on average assets and average common equity of 1.70 percent and 16.5 percent, respectively, as well as an efficiency ratio of 50.4 percent. Additionally, we posted positive operating leverage on both a year-over-year and linked quarter basis, and we achieved these results despite an economy described as only modestly growing and burdened by uncertainty."

“Our third quarter earnings included continued strong mortgage banking activity, which contributed to our growth in fee income, residential real estate loans and loans held for sale. Solid new lending activity outside of mortgage also helped to grow our balance sheet, particularly in commercial loans, which grew on average by 21.9 percent year-over-year and 4.2 percent on a linked quarter basis. On the retail side, automobile loans and leases, a national business for our Company, also continued to show good growth in the quarter. Finally, strong growth in average deposits over the prior time periods demonstrated that we continued to enjoy a flight to quality as consumers and businesses sought a safe and stable financial partner and, along with the growth in our loan and fee-based businesses, continued to expand our market share."

“The overall credit quality of our loan portfolio continued to improve, as net charge-offs and nonperforming assets, excluding a change in reporting for collateralized loans to consumers who have filed for bankruptcy, both declined on a linked quarter basis. We expect this downward trend in net charge-offs and nonperforming assets to continue in the fourth quarter, with the net charge-off ratio remaining below one percent."

“With our growth in earnings, we continued to generate significant capital. Our capital ratios remained strong with a Tier 1 common ratio of 9.0 percent and a Tier 1 capital ratio of 10.9 percent at September 30th. Importantly, based on our assessment of the proposed rules for the Basel III standardized approach, our Tier 1 common equity ratio was 8.2 percent at September 30th, above our targeted ratio of 8.0 percent. We are where we need to be in terms of our capital levels. As a result, during the third quarter we were able to return 67 percent of our earnings to shareholders in the form of dividends and share buybacks – consistent with our goal of returning 60-80 percent of the capital we generate back to our shareholders."

“Finally, I want to take this opportunity to thank our almost 66,000 dedicated, engaged employees, who come to work each day with the goal of providing our customers with the products and services they need to handle their finances, buy a home, prepare for retirement, or manage and expand their businesses. In other words, help them shape their future and reach their dreams. Our industry has an important role to play in the growth and success of each of our customers – large and small – and the economy as a whole. I look forward to being a part of that future for the benefit of our customers, communities, employees and, importantly, our shareholders.”

$USB $XLF

Bank of America Earnings Review: Ongoing Volatility


Bank of America reported QE September 2012 financial results on October 17

Bank of America, the World's Most Unstable Bank, is inexplicable at this point in their corporate life cycle. I continue to have the vague, hopeful feeling that BAC has moved on from the very worst of their troubles. However, doom is most likely alive and well in the background and may be in the form of junk mortgage repurchases and retribution for various morally reprehensible deeds performed. For now, a sigh of relief is in order as we wait and see what financial catastrophe the next quarter might bring.

CEO Brian Moynihan continues cleaning up the carnage from the biggest debacle in American banking history. Moynihan announced last quarter Project New BAC: a multi-year, multi-billion dollar cost cutting plan which will include a workforce reduction of tens of thousands. The past "banking" model was broken (actually it shattered and collapsed into rubble).

The foremost problem is contingent liabilities, ongoing legacy losses, that surface and the lawsuits and government regulatory actions that result. After reserving billions of dollars, the worst of the incredible and extraordinary losses appear accounted for. Only time and fate will tell.

Therefore financial performance is and will be volatile. Risk management consists of all hands on deck searching the skies for incoming realized losses and hoping they are adequately reserved for. Financial position has stabilized and capital is actually strong.

At QE 9-30-12, I have rated Bank of America a "B-" on a scale of A+ to G-. This is a downgrade from "B" at the prior QE 6-30-12. The median rating is "D" and the average rating at QE 6-30-12 was "C". Financial position is weighted more than financial performance. The QE 6-30-12 bank ratings review is here.







"We are doing more business with our customers and clients: Deposits are up; mortgage originations are up; we surpassed 11 million in mobile customers; small business lending is up 27 percent year over year; loans to our commercial clients rose for the seventh consecutive quarter; and our corporate clients made us the second-ranked global investment banking firm," said Brian Moynihan, chief executive officer. "Our strategy is taking hold even as we work through a challenging economy and continue to clean up legacy issues."

"Our focus on strengthening the balance sheet continued this quarter," said Chief Financial Officer Bruce Thompson. "We ended the quarter with record Tier 1 common capital ratio of 11.41 percent and an estimated Basel 3 Tier 1 common capital ratio of 8.97 percent, up from 7.95 percent as of the second quarter of 20121. With these gains, we have turned our attention to driving core earnings."

$BAC $XLF

Tuesday, October 23, 2012

Bank Failure Friday: FDIC Closes 3 Banks!



The FDIC closed 3 banks on Friday, October 19, 2012. Total bank failures for 2012 increased to 46. Credit union failures for 2012 remain at 11.

#44 GulfSouth Private Bank, Destin, FL
* SmartBank, Pigeon Forge, TN assumed all of the deposits and purchased most of the assets
* As of June 30, 2012, the bank had approximately $159.1 million in total assets
* FDIC estimates the cost to the Deposit Insurance Fund (DIF) will be $36.1 million
* The last bank closed in the state had been The Royal Palm Bank of Florida, Naples, on July 20, 2012

#45 First East Side Savings Bank, Tamarac, FL
* Stearns Bank NA, St. Cloud, MN assumed all of the deposits and purchased most of the assets
* As of June 30, 2012, the bank had approximately $67.2 million in total assets
* FDIC estimates the cost to the Deposit Insurance Fund (DIF) will be $9.1 million
* The last bank closed in the state had been GulfSouth Private Bank, Destin, earlier today

#46 Excel Bank, Sedalia, MO
* Simmons First National Bank, Pine Bluff, AR assumed all of the deposits and purchased most of the assets
* As of June 30, 2012, the bank had approximately $200.6 million in total assets
* FDIC estimates the cost to the Deposit Insurance Fund (DIF) will be $40.9 million
* The last bank closed in the state had been Truman Bank, St. Louis, on September 14, 2012

States where banks have been seized by the FDIC in 2012 (in alphabetical order): Alabama 1, California 1, Florida 7, Georgia 9, Illinois 7, Indiana 1, Kansas 1, Maryland 2, Michigan 1, Minnesota 4, Missouri 3, New Jersey 1, North Carolina 1, Oklahoma 1, Pennsylvania 1, South Carolina 2, Tennessee 3. Georgia and Florida have accounted for 28% of all bank failures in 2012 to-date. Georgia and Florida accounted for 36 total or 39% of all bank failures in 2011.

USA Failed Banks by Year Bank failures skyrocketed in 2009 and 2010 to 140 and 157, respectively - a 2-year total of 297 compared to 32 from 2004 through 2008. Bank failures in 2011 continued at a high rate of 92. The total 2012 closings are currently estimated at 57. The 2012 annual bank failures are extrapolated from the weeks reported and failures year-to-date.



Cost of Failed Banks The total estimated cost to the FDIC Deposit Insurance Fund for the 2012 bank closures year-to-date is $2.22 billion.



The most costly banks to the Deposit Insurance Fund (DIF) in 2012 year-to-date:
1 Tennessee Commerce Bank, Franklin, TN $416.8M
2 The First State Bank, Stockbridge, GA $216.2M
3 Inter Savings Bank FSB, Maple Grove, MN $117.5M
4 Fidelity Bank, Dearborn, MI $92.8M
5 First Guaranty Bank & Trust Company of Jacksonville, Jacksonville, FL $82.0M
6 Second Federal Savings and Loan Association of Chicago, Chicago, IL $76.9M
7 Plantation Federal Bank, Pawleys Island, SC $76.0M
8 BankEast, Knoxville, TN $75.6M
9 Montgomery Bank & Trust, Ailey, GA $75.2M
0 Central Bank of Georgia, Ellaville, GA $67.5M



Failed Credit Unions
The National Credit Union Administration (NCUA) has seized and/or closed 11 credit unions in 2012:
5 have been liquidated and sold
* Telesis Community Credit Union of Chatsworth, CA
* Wausau Postal Employees Credit Union of Wausau, WI
* Saguache County Credit Union of Moffat, CO
* People Community Development Credit Union of Philadelphia, PA
* A M Community Credit Union of Kenosha, WI
4 have been liquidated and closed
* El Paso’s Federal Credit Union of El Paso, Texas
* United Catholic Credit Union of Temperance, MI
* Western Bridge Corporate FCU of San Dimas, CA
* Shepherd’s Federal Credit Union of Charlotte, NC
2 have been liquidated and merged
* Trinity Credit Union, Trinidad, CO
* Eastern New York Federal Credit Union of Napanoch, NY
No credit unions are now in conservatorship and managed by the NCUA

States where credit unions have been seized by the NCUA in 2012 (in alphabetical order): California 2, Colorado 2, Michigan 1, New York 1, North Carolina 1, Pennsylvania 1, Texas 1, Wisconsin 2.

$XLF $SPY $DIA $QQQ $IWM $MACRO $FED

PNC Financial Services Earnings Review: Performance Strengthens


PNC Financial Services reported QE September 2012 financial results on October 16

CEO James Rohr delivered a solid quarter with improved financial performance, rebounding from the prior quarter earnings disappointment. Financial position is solid with very strong capital. Risk management appears very good.

Various non-operating and non-recurring items offset each other this quarter, "Third quarter 2012 net income included an after tax gain on the sale of 5 million Visa Class B common shares of $89 million, or $.17 per diluted common share, noncash charges for unamortized discounts related to redemption of trust preferred securities of $61 million after tax, or $.12 per diluted common share, and (RBC) integration costs of $23 million after tax, or $.04 per diluted common share."

At QE 9-30-12, I have rated PNC Financial Services a "B+" on a scale of A+ to G-. This is no change in the rating from the prior QE 6-30-12. The median rating is "D" and the average rating at QE 6-30-12 was "C". Financial position is weighted more than financial performance. The QE 6-30-12 bank ratings review is here.







“PNC’s results for the second quarter reflected strong operating performance in a challenging environment,” said James E. Rohr, chairman and chief executive officer. “While we experienced a few items that reduced our earnings in the short term, we were very pleased with our success in continuing to grow customer relationships and loans resulting in strong revenue. We are excited about the opportunities we see in our newly acquired southeastern markets and across our entire franchise to drive long-term value.”

$PNC $XLF

Goldman Sachs Earnings Review: Moderate Rebound by Banksters


Goldman Sachs reported QE September 2012 financial results on October 16

Goldman Sachs, The World's Most Hated Bankers, led by CEO Lloyd Blankfein, the World's Most Corrupt Banker, reversed the financial performance downtrend with a moderate rebound. Financial position has been stable, but capital continues questionable. The 7 Deadly Sins have superseded risk management. We await what hell this Epitome of Evil will contrive next for America, currently they are busy focusing on scamming Europeans.

At QE 9-30-12, I have rated Goldman Sachs an "F-" on a scale of A+ to G-. This is an upgrade from "G+" at the prior QE 6-30-12. The median rating is "D" and the average rating at QE 6-30-12 was "C". Financial position is weighted more than financial performance. The QE 6-30-12 bank ratings review is here.







“This quarter’s performance was generally solid in the context of a still challenging economic environment,” said Lloyd C. Blankfein, Chairman and Chief Executive Officer. “We continue to be disciplined in managing our operations and capital, while effectively serving our clients’ needs. The focus on these priorities will serve our shareholders and the firm well over the longer term.”

$GS $XLF

Citigroup Earnings Review: Masquerading as Financial Institution


Citigroup reported QE September 2012 financial results on October 15

CEO Vikram Pandit continues his incredible legacy of proving he is neither an investment banker nor a traditional banker, yet is steward of almost $2 trillion in assets. Never has so much been so mismanaged, with the exception of Bank of America. Financial position is stable but financial performance is downtrending. Capital is adequate. Risk management has been trumped by incompetence. Citigroup is in the Trillion Dollar Assets Club with JPMorgan, Bank of America, and Wells Fargo.

Another colossal error in judgement resulted in a $2.9 billion after-tax loss. That would be the partial sale and impairment of the Morgan Stanley Smith Barney (MSSB) joint venture, which wiped out the quarterly financial results. Only a kindred, i.e. depraved, soul would have entered into a partnership with that den of iniquity.

At QE 9-30-12, I have rated Citigroup an "E+" on a scale of A+ to G-. This is a downgrade from "D-" at the prior QE 6-30-12. The median rating is "D" and the average rating at QE 6-30-12 was "C". Financial position is weighted more than financial performance. The QE 6-30-12 bank ratings review is here.







Vikram Pandit, Citi’s Chief Executive Officer, said: "Our core businesses showed momentum during the quarter as we increased lending and generated higher operating revenues. These earnings highlight the strength of Citicorp and its diversification by product and region. For the third straight quarter, we had positive operating leverage in each of our three core businesses. Citigroup in total also had positive operating leverage as Citi Holdings had a smaller impact on our overall results."

"Last month’s price agreement on MSSB has given us more certainty on our exit from that business and added to the reduction of Citi Holdings, which is now only 9% of our balance sheet. We generated additional capital during the quarter, and our Tier 1 Common Ratio was estimated at 8.6% on a Basel III basis at the end of the period. We are managing risk very carefully given global economic conditions so we can continue to grow our businesses safely and soundly,” concluded Mr. Pandit.

$C $XLF

Saturday, October 20, 2012

Wells Fargo Earnings Review: Another Record Performance!


Wells Fargo reported QE September 2012 financial results on October 12

Wells Fargo reported yet another superb quarter. CEO John Stumpf has continued to improve both financial performance and position. Capital is strong. Risk management appears excellent. Earnings per share of $0.88 is yet another all-time high.

Wells Fargo is easily the preeminent USA bank with assets greater than $1 trillion and the largest traditional American bank. The other banks in the Trillion Dollar Assets Club are JPMorgan, Bank of America, and Citigroup.

At QE 9-30-12, I have rated Wells Fargo an "A-" on a scale of A+ to G-. This is no change in the rating from the prior QE 6-30-12. The median rating is "D" and the average rating at QE 6-30-12 was "C". Financial position is weighted more than financial performance. The QE 6-30-12 bank ratings review is here.







“Through the efforts of our more than 265,000 team members, we've now achieved six consecutive quarters of record net income and EPS,” said Chairman and CEO John Stumpf. “By focusing on earning all of our customers' business and providing outstanding service, we continued to generate growth across our diversified set of businesses. In the third quarter, core loans grew by $11.9 billion and we saw continued strength in our mortgage and deposit businesses. We remained diligent in managing costs and continued to have strong underlying credit performance as our loss mitigation efforts and the low interest rate environment helped improve affordability for our customers.”

$WFC $XLF

JPMorgan Earnings Review: Solid Quarter!


JPMorgan reported QE September 2012 financial results on October 12

CEO Jamie Dimon and accomplices reported a solid quarter with an impressive earnings per share of $1.40, a post-financial crisis high. Both financial performance and position improved. Capital is adequate. Risk management is always the great uncertainty at the largest of the Wall Street Banksters.

At QE 9-30-12, I have rated JPMorgan a "D" on a scale of A+ to G-. This is no change in the rating from the prior QE 6-30-12. The median rating is "D" and the average rating at QE 6-30-12 was "C". Financial position is weighted more than financial performance. The QE 6-30-12 bank ratings review is here.







Jamie Dimon, Chairman and Chief Executive Officer, commented on financial results: "The Firm reported strong performance across all our businesses in the third quarter of 2012. Revenue for the quarter was $25.9 billion, up 6% compared with the prior year, or 16% before the impact of DVA. These results reflected continued momentum in all our businesses."

Dimon continued: "The Investment Bank reported favorable Fixed Income Markets results and maintained its #1 ranking for Global Investment Banking fees. Consumer & Business Banking average deposits were up 9% and Business Banking loan balances grew for the eighth consecutive quarter to a record $19 billion, up 8% compared with the prior year. Mortgage Banking originations were $47 billion, up 29% compared with the prior year. Credit Card sales volume1 was up 11% compared with the prior year. Commercial Banking reported record revenue and grew loan balances for the ninth consecutive quarter to a record $124 billion, up 15% compared with the prior year. Treasury & Securities Services assets under custody rose to a record $18.2 trillion, up 12% compared with the prior year. Asset Management reported positive net long-term product flows for the fourteenth consecutive quarter and record loan balances of $75 billion."

Dimon commented: "Importantly, we believe the housing market has turned the corner. In our Mortgage Banking business, we were encouraged that credit trends continued to modestly improve, and, as a result, the Firm reduced the related loan loss reserves by $900 million. Despite this improvement, the absolute level of charge-offs remains elevated. We also expect to see high default-related expense for a while longer. We are acting responsibly to help homeowners and prevent foreclosures, offering nearly 1.4 million mortgage modifications and completing 578,000 since 2009. Credit trends in our credit card portfolio continued to improve, and the wholesale credit environment remained stable."

$JPM $XLF

Monday, October 8, 2012

American Express & Walmart Launch Bluebird: Alternative to Debit & Checking Accounts

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American Express and Walmart Launch Bluebird®: a New Alternative to Debit and Checking Accounts

Bluebird addresses the need for an affordable, transparent way to manage everyday finances, with premium features, no minimum balance, monthly, or overdraft fees

BENTONVILLE, Ark.--(BUSINESS WIRE)--Oct. 8, 2012-- Walmart and American Express today announced the launch of Bluebird, an alternative to debit and checking accounts designed to help consumers better manage and control their everyday finances. Bluebird has been developed for the tens of millions of Americans who are looking for advanced capabilities such as deposits by smartphone and mobile bill pay, fee transparency, and no minimum balance, monthly, annual or overdraft fees. Bluebird puts the power back in the hands of consumers and will be available next week online at www.bluebird.com and in more than 4,000 Walmart stores.

Building on a pilot program launched in late 2011, Bluebird was shaped by feedback from consumers who said they were not getting the value they expect from traditional checking account and debit services because of increasingly higher fees. According to an independent study by Bretton Woods 1, consumers now pay an average of $259 per year for a basic checking account and that cost is rising due to higher minimum balance requirements and a growing list of fees being added to these services.

"Our customers tell us that they're tired of navigating a complex maze of dos and don'ts to avoid the ever growing list of fees found on checking products. Bluebird solves this problem and we believe it's the best product on the market to help customers affordably manage their everyday finances," said Daniel Eckert, vice president of financial services for Walmart U.S. "At Walmart, we are always looking for ways to make a difference by using the strengths that come with our size, scale and reach to take on the challenges that matter most to our customers. Reducing the costs and frustration that come with high fees is one of these issues."

"The financial services landscape is changing. Technological advances, regulatory changes, and evolving consumer needs are redefining payments ranging from prepaid, to checking and debit. Bluebird is our solution to help consumers who currently may be poorly served by traditional banking products. It allows them to easily and safely move, manage, and spend their money. In an era where it is increasingly "expensive to be poor," we have worked with Walmart to create a financial services product that rights many of the wrongs that plague the market today," said Dan Schulman, group president, Enterprise Growth, American Express.

Read more

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Thursday, October 4, 2012

USA Small Business Outlook Retreats As Election Looms

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U.S. Small Business Outlook Retreats As Election Looms

PNC Survey Findings Show Decline in Hiring, Expectations; Majority Say They Are Not 'Better Off'

PITTSBURGH, Oct. 4, 2012 /PRNewswire/ -- A soft outlook on sales has only one in four small business owners planning to hire in the next six months as business optimism retreats ahead of next month's presidential election, according to the latest findings of the PNC Economic Outlook.

The fall findings of PNC's biannual survey, which began in 2003, show a decline in owners' expectations for sales and profits as the lackluster economic recovery struggles to gain steam. Business owners have less optimism about their local economies and are significantly more negative on the national level compared to last spring. Despite this dip in sentiment, owners remain more upbeat than this time last year, when optimism hit near-historic lows.

"The pace of the U.S. economic and jobs recovery remains disappointing," said Stuart Hoffman, chief economist at PNC. "Despite significant headwinds like the deepening recession in Europe and impending 'fiscal cliff,' the hiring plans and business outlook reflected in this survey are just enough to keep the modest recovery persistent into 2013."

Are You Better Off?
One out of two (48 percent) owners say they are currently "worse off" compared to 2007, when the recession officially began, while only 26 percent claim they are "better off." When asked how they have adapted to survive in the new economic environment, more than two-fifths (42 percent) said they seek greater productivity or efficiency from their employees, and one-third (33 percent) have reduced or consolidated their operations since 2007.

Highlights: Sales, Profits and Hiring Take a Hit
 The survey, which gauges the mood and sentiment of small and medium sized business owners, found that only 46 percent expect their sales to increase in the next six months, significantly lower than last spring (58 percent). Profits are also expected to be lower, as only 38 percent expect an increase compared to 43 percent in the spring. Only 23 percent expect to add new employees, lower than in spring (28 percent) but still higher than a year ago (20%).

Other findings about the next six months include:

* Optimism is Fading: Six in 10 (57 percent) are now pessimistic about the national economy over the next six months, up from just 43 percent in the spring. Seven out of 10 (69 percent) are pessimistic about the global economy over the same period.

* Capital Spending Declines: Only 58 percent plan to spend on capital investments in the next six months, down significantly from 70 percent last spring. Spending on technology equipment remains the top priority.

* Loan Demand Flattens: Less than one-fifth (19 percent) will probably or definitely take out a new loan or line of credit in the next six months, compared to 23 percent last spring. Nearly one in three (30 percent) have no current need for credit, a major increase from 13 percent last spring.

* House Prices Rebounding: In a dramatic turnaround from the past five years, two-fifths (37 percent) expect home prices in their local market to rise in the coming year, while only 13 percent expect them to drop. A year ago those numbers were almost exactly reversed (14 percent expected a rise, 32 percent expected a drop).

* Healthcare Hurts Hiring...: More than two-fifths (42 percent) believe the Supreme Court ruling to uphold the Affordable Care Act will negatively affect their hiring plans in the coming year.

* ... But More Federal Action Could Help: Nearly two-thirds (63 percent) think Federal action following the election will positively influence their hiring plans, with reduced regulations the top choice and reduced government spending a close second.”

The PNC Financial Services Group, Inc. (www.pnc.com) is one of the nation's largest diversified financial services organizations providing retail and business banking; residential mortgage banking; specialized services for corporations and government entities, including corporate banking, real estate finance and asset-based lending; wealth management and asset management. Follow @PNCNews on Twitter for breaking news and announcements from PNC.

Methodology
The PNC Economic Outlook survey was conducted between July 23 to September 10, 2012, by telephone within the United States among 1,697 owners or senior decision-makers of small and mid-sized businesses with annual revenues of $100,000 to $250 million. The results given in this release are based on interviews with 506 businesses nationally, while the remaining interviews were conducted among businesses within the states of Florida, Georgia, Illinois, Indiana, Michigan, New Jersey, North Carolina, Ohio and Pennsylvania. Sampling error for the national results is +/- 4.3 percent at the 95 percent confidence level. The survey was conducted by Artemis Strategy Group (www.ArtemisSG.com), a communications strategy research firm specializing in brand positioning and policy issues. The firm, headquartered in Washington D.C., provides communications research and consulting to a range of public and private sector clients.

U.S. Small Business Outlook Retreats As Election Looms

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NCUA Sues Credit Suisse over Faulty Securities

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NCUA Sues Credit Suisse over Faulty Securities

Legal Action is the Agency’s Eighth against Wall Street Investment Firms

NCUA has previously filed similar actions against J.P. Morgan Securities, LLC, RBS Securities, Goldman Sachs, Wachovia, UBS Securities, and Barclay’s. NCUA has already settled claims worth more than $170 million with Citigroup, Deutsche Bank Securities and HSBC, making it the first federal regulatory agency for depository institutions to recover losses from investments in faulty securities on behalf of failed financial institutions.

Recoveries from these eight additional legal actions will further reduce the total losses resulting from the failure of the five corporate credit unions. Losses from those failures must be paid from the Temporary Corporate Credit Union Stabilization Fund. Expenditures from this fund must be repaid through assessments against all federally insured credit unions, so any recoveries would help reduce future assessments on credit unions.

(NCUA; September 25, 2012)

ALEXANDRIA, Va. (Oct. 4, 2012) – The National Credit Union Administration (NCUA) today filed suit in Federal District Court in Kansas against Credit Suisse Securities (USA).

NCUA’s suit alleges Credit Suisse, a subsidiary of the Swiss-based financial services firm, violated federal and state securities laws through misrepresentations in connection with the underwriting and subsequent sale of mortgage-backed securities to U.S. Central Federal Credit Union (US Central), Western Corporate Federal Credit Union (WesCorp) and Southwest Corporate Federal Credit Union (Southwest).

The price paid for the securities by the three corporates exceeded $715 million. All three corporate credit unions subsequently failed.

“Credit Suisse is one of several firms that sold faulty securities to corporate credit unions, which led to their collapse,” said NCUA Board Chairman Debbie Matz. “These Wall Street firms ran a bait and switch operation, and the effects were felt not only in credit unions, but throughout the financial industry. NCUA and credit unions have successfully worked together to restore stability to the credit union system. Now we are holding responsible parties, like Credit Suisse, accountable for their actions.”

NCUA’s complaint alleges Credit Suisse made numerous misrepresentations and omissions of material facts in the offering documents of the securities sold to the failed corporate credit unions. The complaint also alleges systemic disregard of the underwriting guidelines stated in the offering documents. These misrepresentations caused the credit unions to believe the risk of loss was minimal, when in fact the risk was substantial.

As liquidating agent for US Central, WesCorp and Southwest, NCUA has a statutory duty to seek recoveries from responsible parties in order to minimize the cost of any failure to its insurance funds and the credit union industry.

Corporate credit unions are wholesale credit unions that provide various services to retail credit unions, which in turn serve consumers, or “natural persons.” Retail credit unions rely on corporate credit unions to provide them such services as check clearing, electronic payments, and investments.

NCUA Sues Credit Suisse over Faulty Securities

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Wednesday, October 3, 2012

OCC: Mortgage Performance Deteriorates from Prior Quarter, Improves from Year Ago

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OCC News Release: Mortgage Performance Improved from a Year Ago, OCC Report Says

(OCC; September 27, 2012)

WASHINGTON — The overall quality of first-lien mortgages serviced by large national and federal savings banks improved from the same period a year ago but showed seasonal decline from the prior quarter, according to a report released today by the Office of the Comptroller of the Currency (OCC).

The OCC Mortgage Metrics Report for the Second Quarter of 2012 showed the percentage of mortgages that were current and performing at the end of the quarter was 88.7 percent, compared with 88.9 percent the prior quarter and 88.1 percent a year earlier. The percentage of mortgages that were 30 to 59 days past due was 2.8 percent, up 12.1 percent from the prior quarter but down 7.5 percent from a year ago. Seriously delinquent mortgages—60 or more days past due or held by bankrupt borrowers whose payments are 30 or more days past due—fell to their lowest level in three years. The percentage of mortgages that were seriously delinquent was 4.4 percent, down 0.8 percent from the prior quarter and 9.2 percent from a year earlier.

Several factors contribute to the year-over-year improvement, including strengthening economic conditions, servicing transfers, and the ongoing effects of both home retention loan modification programs as well as home forfeiture actions.

Servicers continued to emphasize alternatives to foreclosure during the quarter. Servicers implemented 416,036 new home retention actions during the quarter, while starting 302,636 new foreclosures. The number of home retention actions implemented by servicers increased 17.9 percent from the prior quarter but decreased 8.8 percent from a year earlier.

Other key findings included:

* On average, the modifications implemented in the second quarter of 2012 reduced borrowers’ monthly principal and interest payments by 24.6 percent, or $381. Modifications made under the Home Affordable Modification Program (HAMP) reduced payments by 35.3 percent on average, or $576.

* Modifications that reduced payments by 10 percent or more performed better than those that reduced payments by less. At the end of the second quarter of 2012, 55.4 percent of modifications made since the beginning of 2008 that reduced payments by 10 percent or more were current and performing, compared with 34.3 percent of modifications made during that time that reduced payments by less than 10 percent.

* Since the beginning of 2008, servicers have modified 2,645,290 mortgages through the end of the first quarter of 2012. At the end of the second quarter of 2012, 48.6 percent of those modifications remained current or had been paid off. Another 7.6 percent were 30 to 59 days delinquent, and 14.9 percent were seriously delinquent. There were 10.5 percent in the process of foreclosure and 6.5 percent had completed the foreclosure process.

The report covers 30.5 million first-lien mortgages worth $5.2 trillion in outstanding balances, about 60 percent of all first-lien mortgages in the United States. The complete report can be downloaded from the OCC Web site, www.occ.gov.

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Bank Failure Friday: FDIC Closes 7th Bank In Illinois This Year



The FDIC closed 1 bank on Friday, September 28, 2012. Total bank failures for 2012 increased to 43. The NCUA closed and liquidated El Paso’s Federal Credit Union of El Paso, TX. Credit union failures for 2012 increased to 11.

#43 First United Bank, Crete, IL
* Old Plank Trail Community Bank, NA, New Lenox, IL assumed all of the deposits and purchased most of the assets
* As of June 30, 2012, the bank had approximately $328.4 million in total assets
* FDIC estimates the cost to the Deposit Insurance Fund (DIF) will be $48.6 million
* The last bank closed in the state had been Waukegan Savings Bank, Waukegan, on August 3, 2012

States where banks have been seized by the FDIC in 2012 (in alphabetical order): Alabama 1, California 1, Florida 5, Georgia 9, Illinois 7, Indiana 1, Kansas 1, Maryland 2, Michigan 1, Minnesota 4, Missouri 2, New Jersey 1, North Carolina 1, Oklahoma 1, Pennsylvania 1, South Carolina 2, Tennessee 3. Georgia and Florida accounted for 36 total or 39% of all bank failures in 2011.

USA Failed Banks by Year Bank failures skyrocketed in 2009 and 2010 to 140 and 157, respectively - a 2-year total of 297 compared to 32 from 2004 through 2008. Bank failures in 2011 continued at a high rate of 92. The 2012 annual bank failures are extrapolated from the weeks reported and failures year-to-date. The total 2012 closings are currently estimated at 57.





Failed Credit Unions The National Credit Union Administration (NCUA) has seized and/or closed 11 credit unions in 2012:
1 is in conservatorship and managed by the NCUA
* Trinity Credit Union, Trinidad, CO
5 have been liquidated and sold
* Telesis Community Credit Union of Chatsworth, CA
* Wausau Postal Employees Credit Union of Wausau, WI
* Saguache County Credit Union of Moffat, CO
* People Community Development Credit Union of Philadelphia, PA
* A M Community Credit Union of Kenosha, WI
1 has been liquidated and merged
* Eastern New York Federal Credit Union of Napanoch, NY
4 have been liquidated and closed
* El Paso’s Federal Credit Union of El Paso, Texas
* United Catholic Credit Union of Temperance, MI
* Western Bridge Corporate FCU of San Dimas, CA
* Shepherd’s Federal Credit Union of Charlotte, NC

States where credit unions have been seized by the NCUA in 2012 (in alphabetical order): California 2, Colorado 2, Michigan 1, New York 1, North Carolina 1, Pennsylvania 1, Texas 1, Wisconsin 2.



Cost of Failed Banks The total estimated cost to the FDIC Deposit Insurance Fund for the 2012 bank closures year-to-date is $2.14 billion.



The most costly banks to the Deposit Insurance Fund (DIF) in 2012 year-to-date:
1 Tennessee Commerce Bank, Franklin, TN $416.8M
2 The First State Bank, Stockbridge, GA $216.2M
3 Inter Savings Bank FSB, Maple Grove, MN $117.5M
4 Fidelity Bank, Dearborn, MI $92.8M
5 First Guaranty Bank & Trust Company of Jacksonville, Jacksonville, FL $82.0M
6 Second Federal Savings and Loan Association of Chicago, Chicago, IL $76.9M
7 Plantation Federal Bank, Pawleys Island, SC $76.0M
8 BankEast, Knoxville, TN $75.6M
9 Montgomery Bank & Trust, Ailey, GA $75.2M
0 Central Bank of Georgia, Ellaville, GA $67.5M

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