Tuesday, April 29, 2008

We're Nowhere Near the Bottom In Banking/Finance

From the WSJ:

Deutsche Bank AG Tuesday reported its first quarterly net loss in five years, reflecting additional asset write-downs, lower revenue and a trading loss in a deteriorating market.

Germany's largest bank by market capitalization said its net loss was €131 million compared with a net profit of €2.12 billion a year earlier. Reflecting fallout from the global financial crisis, quarterly revenue tumbled 52% to €4.6 billion from €9.6 billion, and the bank swung to a trading loss of €1.58 billion from a €3.97 billion trading profit in the year-earlier quarter.

The bank marked down assets by a net €2.7 billion for the quarter. The write-downs included around €1.77 billion on leveraged finance loans and loan commitments and €885 million on commercial real-estate and residential mortgage-backed securities, including Alt-A mortgages, which are a step above subprime quality.

First-quarter write-downs were slightly higher than the approximate €2.5 billion the bank had anticipated April 1 when it warned that its quarterly result would be weak.

From the WSJ:

The United Kingdom's largest mortgage lender, HBOS PLC, said Tuesday that it would launch a £4 billion ($7.96 billion) rights issue to reinforce its capital and bolster the bank against a worsening market.

It also cut its dividend payout to 40% for 2008 from 46% in 2007,
saying this reflected the bank's ongoing capital requirements. "In future years, the board intends to pursue a progressive dividend policy, growing dividends in line with underlying earnings," HBOS said.

The rights issue offers investors two new ordinary shares at 275 pence each for every five held, 45% below the lender's closing share price of 496 pence Monday.

From IBD:

Morgan Stanley (MS) warned that difficulties in the credit markets are only in their "third inning," and urged shareholders to sell financial stocks that have rebounded off March lows. "We think it's a mistake to chase this rally," it said in a investors note. It predicted dividend cuts at Bank of America, (BAC) SunTrust Banks, (STI) U.S. Bancorp (USB) and Wells Fargo. (WFC) It also expects Citigroup (C) and Wachovia (WB) to further cut their payouts. SunTrust and Citi rose, while the others dipped.