Tag Archives: Ally Financial

Report: Saab US bankruptcy plan gets legal green-light

By Brandon Turkus


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It feels utterly bizarre that we’re still talking about Saab, but Reuters is reporting that the bankrupt Swedish manufacturer’s American arm has gotten approval from the US Bankruptcy Court to liquidate its assets and pay back creditors. As part of the plan, secured creditors like Ally Financial will receive full repayment. Unsecured creditors, consisting of those affected by abandoned leases and contracts will get anywhere from 25 to 82 percent of their money back.

There are currently $77 million in unsecured claims, according to Reuters, but that number doesn’t include claims from former Saab dealers. Naturally, the entire affair is full of lawyers and legalese. A trust formed on the Saab side will be negotiating with creditors and their affiliates in an attempt to reduce claims against Saab. This sounds like the start of a long and sordid affair…

Saab US bankruptcy plan gets legal green-light originally appeared on Autoblog on Thu, 18 Jul 2013 17:45:00 EST. Please see our terms for use of feeds.

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Source: FULL ARTICLE at Autoblog

EV Price War: Ford Slashes Focus Electric Price by $4000, Now Starts at $35,995

By Nick Palermo

Ford is lowering the price of its all-electric version of the Focus, cutting the price by $4000 to $35,995. The reduction is further evidence of a price war in the EV market, following the announcement of lower pricing and/or special lease rates for electrics such as the Nissan Leaf, Honda Fit EV, and Fiat 500E, as well as the plug-in hybrid Chevrolet Volt. Ford says the move is intended to make the electric Focus, which is available nationwide, more appealing to customers considering a plug-in vehicle.

The Nissan Leaf is still the most affordable of the aforementioned models, with a starting price of $29,650. It’s also among the most efficient, rated at 115 MPGe in combined city/highway driving. Range for the all-electric Nissan, though, is the lowest in this group at 75 miles. The Focus Electric, by comparison, ekes out one more mile of range despite a lower combined efficiency rating of 105 MPGe.

The $32,600 Fiat 500E is available only in California. The 500E can travel 87 miles on electricity alone and is rated at 116 MPGe combined. The Honda Fit EV, meanwhile, is rated at 118 MPGe combined and has a driving range of 82 miles. It’s priced at $37,415, although it is offered as a lease only. Currently, the Fit EV is available in California, Oregon, New York, New Jersey, Massachusetts, Maryland, Rhode Island, and Connecticut.

The Focus Electric now matches the price of the plug-in hybrid Chevrolet Volt, which is available at $35,995 for cash buyers and $36,995 if it’s leased or financed through Ally Financial or Wells Fargo. And although the Volt relieves so-called range anxiety by backing up its battery power with a gas engine, it has a limited electric-only range of 38 miles. On battery power alone, the Volt is rated at 98 MPGe combined; once the gas engine takes over, combined fuel economy is 37 mpg. Chevy recently added the all-electric Spark EV to its lineup, but smaller and priced at $27,495, The Spark EV is not a direct competitor to the Focus Electric. The Spark EV’s availability remains limited to Oregon and California.

With EVs commanding less than 1 percent of U.S. market share, automakers are anxious to incentivize sales. Ford addresses some of the driving public’s reluctance to go electric with this price drop, and, as with all EVs, the Focus Electric’s price can potentially be even lower when eligible buyers take advantage of any federal, state, and local tax credits and incentives that are available to them. Concerns about range and long-term reliability, however, still remain considerable obstacles for many would-be EV drivers.

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Source: FULL ARTICLE at Car & Driver

Ally Financial's Woeful Performance

By Amanda Alix, The Motley Fool

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For most financial institutions, the Fed-mandated stress test and Comprehensive Capital Analysis and Review went pretty well, with prior year laggards Citigroup and Bank of America emerging stronger than ever.

But for Ally Financial, the former auto-loan segment of General Motors, things went even further south than last year, when it was able to muster a 2.5% minimum ratio. This year, Ally finished up with a measly 1.5% Tier 1 common ratio — and the same ratio for its post-stress, proposed capital actions metric. These were the lowest scores of any of the 19 financial institutions tested.

Ally: Not our fault
Almost immediately after the results were in, Ally released a statement opining that the Fed’s methodology was faulty, and stating that, among other things, Ally’s capital levels are just fine and dandy. Was the Fed unfair to poor Ally?

Of course, Ally wasn’t the only institution flagged by the Fed. Both JPMorgan Chase and Goldman Sachs were told that their capital plans didn’t meet specifications, and they must resubmit new and improved proposals before the end of the third quarter.

More surprisingly, regional heavyweight BB&T , like Ally, had its plan rejected despite its stellar performance on the stress test. This is likely because of some changes the bank made to its risk-weighted asset calculation, however, and not because of some other, more serious problem.

Government would like to shed the Ally albatross
Ally complained about being ill-used by the stress test last year, so it’s really no surprise that it would do so this year, as well. Of course, going into the test with a Tier 1 common ratio of 7.3%, the lowest of any institution tested, could have something to do with the results. In addition, the Fed was clear about Ally still being considered responsible for liabilities tied to Residential Capital, its bankrupt mortgage loan subsidiary.

Also, like American Express , Ally was allowed to submit a spanking-new capital plan after the Fed gave the original entry an early thumbs-down. American Express emerged triumphant — but even with that boost, Ally failed. The mulligan also made Ally look less than astute, since the original plan would have left them with a slightly higher, albeit still failing, score.

Just as it did with AIG, the government seems keen to sell off its 74% interest in Ally, possibly this year. This probably won’t happen until Ally looks healthier, and sheds more mortgage-related assets, such as the mortgage servicing rights it recently sold to Quicken Loans.

Certainly, then, the government would want to make Ally look better, not worse. It seems, however, that this was not possible, and Ally has only itself to blame.

Will BB&T’s stumble create a buying opportunity? With big finance firms still trading at deep discounts to their historic norms, investors everywhere are wondering if this is the new normal, or whether finance stocks are a screaming buy today. The answer depends on the company, so to help you figure out whether …read more
Source: FULL ARTICLE at DailyFinance

JPMorgan Deserves $52 Share Price, Goldman $157

By Trefis Team, Contributor

The Federal Reserve last week published its much-awaited report detailing its consent and dissent to capital plans proposed by the country’s biggest banks. While most of the banks got the mandatory clearance they sought to return more cash to investors through dividend hikes and share repurchases, Ally Financial and BB&T Corp. were not so lucky as the Fed rejected their capital plans for the year. …read more
Source: FULL ARTICLE at Forbes Latest

Consumer Confidence Cools Dow

By Jeremy Bowman, The Motley Fool

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After 10 straight days of gains, the Dow Jones Industrial Average finally gave back ground today, falling 25 point,s or 0.2%. The blue chips never broke into positive territory, because a poor consumer sentiment report, and a higher-than expected Consumer Price Index dampened the optimism that’s fueled this month’s rally.

Consumer prices jumped 0.7% in February, in large part due to a 9% increase in gas prices during the month. Overall, it was the biggest increase in consumer prices in over three years. The core CPI, which excludes food and energy, rose just 0.2%.

Meanwhile, consumer confidence dropped to 71.8, from 77.6 last month, a figure economists thought would hold, according to a University of Michigan survey. The current mark is the lowest level since December 2011, as worries about sequestration and the layoffs that may result appear to have disquieted the average consumer. The survey reported a record percentage of unfavorable responses to government fiscal policies, and consumer expectation of conditions over the next few months dropped sharply.

As for individual stocks, banks were big movers today after the Fed released its decision on which of the 18 too-big-to-fail banks could return capital to shareholders. The Fed approved the plans of 14 of the lenders, asked JPMorgan Chase and Goldman Sachs for resubmission, and outright rejected the plans of BB&T and Ally Financial. JPMorgan shares dropped 1.9% as a result, and the bank cut its share buyback plan in half, to $6 billion. It also raised its quarterly dividend from $0.30, to $0.38. Separately, in Senate hearings today, JPMorgan’s former Chief Investment Officer Ina Drew, who was in charge of the unit that lost $6.2 billion in the “London Whale” trade, denied wrongdoing as the bank continues to defend itself.

Bank of America shares shot up 3.8% today after the Fed approved its plan to buy back $5 billion worth of common stock and $5.5 billion in preferred shares. B of A did not submit plans to increase its dividend, which sits at just $0.01 per quarter. Still, the approval was a big step for the lender as it’s struggled to return to solvency following the financial crisis.

Boeing was also a big winner today, climbing 2.1% to a new five-year high after it said the 787 should be back in flight in just a few weeks, thanks to a fortified power pack that would negate the fire risk.

Bank of America’s stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it’s critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool’s premium research report on B of A, analysts Anand Chokkavelu, CFA, and Matt Koppenheffer, Financials bureau chief, lift the veil on the bank’s operations, including detailing three reasons to buy, and three reasons to sell. Click here now to claim your copy.

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Source: FULL ARTICLE at DailyFinance

The Federal Reserve Weighs In: Which Banks Can Pay Bigger Dividends?

By Matt Koppenheffer, The Motley Fool

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This time last week, bank investors were reveling in the results of the Dodd-Frank stress tests, which showed that most major U.S. banks have solid, recession-resistant balance sheets. This week, the Federal Reserve took the stress testing process to the next level and evaluated which banks can proceed with their capital plans.

While the specifics of the individual banks’ capital plans can vary considerably, what most investors are focused on is the banks’ requests to pay higher dividends and launch share buyback plans. 

Citigroup  ruined much of the suspense last week when it pre-emptively announced that it wouldn’t be seeking a higher dividend, but would ask for a small-ish share buyback authorization. There wasn’t much suspense around Ally Financial, either. The former GMAC was hopping mad after the Fed flunked it during the Dodd-Frank round of tests.

For most banks though, yesterday was the day to find out — in most cases — exactly what kind of capital distributions they could hope for in the year ahead. For Bank of America  shareholders, the answer was up to $5 billion in share buybacks. For Wells Fargo , it’s a potential 20% dividend bump and more share buybacks. And while the news was good for most banks, the answer for BB&T  was a thumbs-down from the Fed as it rejected the bank’s capital plan.

To help you get the inside view on how each company fared, we’ve put together a comprehensive run-down on each company (aside from Ally) that participated in the tests. Click the links below to find out which banks passed and what their shareholders can look forward to in 2013.

The Big Four Regional Banks Others
Bank of America BB&T  American Express 
Citigroup Fifth Third  Bank of New York Mellon 
JPMorgan Chase KeyCorp  Capital One  
Wells Fargo  PNC Financial Goldman Sachs 
  Regions Financial  Morgan Stanley 
  SunTrust  State Street 
  U.S. Bancorp   

Buybacks ahead for B of A!
Bank of America’s stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it’s critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool’s premium research report on B of A, analysts Anand Chokkavelu, CFA, and Matt Koppenheffer, Financials bureau chief, lift the veil on the bank’s operations, including detailing three reasons to buy and three reasons to sell. Click here now to claim your copy.

var FoolAnalyticsData = FoolAnalyticsData || []; …read more
Source: FULL ARTICLE at DailyFinance

Goldman to Return Capital to Shareholders … Probably

By John Grgurich, The Motley Fool

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One week after the Federal Reserve released the initial results of its bank stress tests — revealing how 18 of the country’s biggest bank holding companies held up under a simulated, severe economic downturn — the nation’s central bank has just released the final results: detailing which bank’s proposed capital plans would be approved, and which would not.

For Goldman Sachs shareholders, the news isn’t ideal, but could have been worse.

Back to the drawing board
“The Federal Reserve did not object to the capital plans for The Goldman Sachs Group … but required [it] to submit new capital plans by the end of the third quarter to address weaknesses in [its] capital planning processes.” So said the Fed in its official report released today.

Essentially, the central bank is sending Goldman back to the drawing board, but only in part. Whatever capital plan the bank had in mind will likely stand, but as Goldman itself put it in a statement released last night: “The company will resubmit its capital plan by the end of the third quarter, incorporating certain enhancements to its stress test processes.”

In the same statement, CEO Lloyd Blankfein himself added: “We are pleased to continue to have the flexibility to return capital to shareholders.” So hurray that Goldman will be returning capital to shareholders, but details on exactly what those capital return actions will be are scant.

“The results exclude requested capital actions that are incorporated into our Comprehensive Capital Analysis and Review,” the bank wrote in a press release published last week, “including the repurchase of outstanding common stock, a potential increase in our quarterly common stock dividend and the possible issuance, redemption and modification of other capital securities.”

Foolish bottom line
Goldman is being cagey about its proposed capital actions, like it was last year. But the good news is, whatever exactly Goldman is planning at least seems to be moving forward, which is more than can be said for the capital actions of Ally Financial, which have been rejected outright. Of course, Ally also outright failed its stress test, coming in with a Tier 1 common ratio of just 1.8%.  

Coming in at 5.8% versus a Fed minimum of 5%, Goldman didn’t exactly pass with flying colors, but it did significantly better than Ally.

The bad news is, if the Fed doesn’t like the reworked plan Goldman comes back with, it could potentially modify the bank’s plans (again, whatever those plans actually are).

But I take heart in the fact that — being the seasoned, smart bunch of cookies they are — Goldman’s top managers will calmly and coolly adjust whatever it is the Fed wants them to adjust and present a capital-return plan and attendant process that will please not only the Fed, but investors as well.

The Comprehensive Capital Analysis and Review isn’t perfect — no testing process is — but it’s nonetheless an important part of keeping our banking system healthy. I’m a Goldman …read more
Source: FULL ARTICLE at DailyFinance

Federal Reserve Approves Huge Increase in Capital One's Dividend

By John Maxfield, The Motley Fool

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To say it’s been a busy two weeks for banks would be an understatement. At the end of last week, the Federal Reserve released the results of this year’s stress tests, which are designed to determine whether the nation’s 18 largest banks have enough capital to survive a severe economic downturn akin to the financial crisis. On the heels of that, the central bank announced yesterday which of these lending giants would be allowed to increase the amount of capital they return to shareholders via dividends and/or share buybacks.

For most of the nation’s banks, the news was relatively positive. With regard to the stress tests, 17 of the 18 banks made it through the Fed’s “severely adverse” economic gauntlet in one piece — Capital One Financial being among them. In addition, many of these same institutions had their requested capital plans for the upcoming year approved as well — Capital One, again, being among the banks to obtain permission. The two most notable exceptions in this regard were the auto-lending giant Ally Financial and Winston-Salem, North Carolina-based BB&Tclick here to learn why BB&T’s request was denied.

In Capital One‘s case, this translates into a six-fold increase in the company’s dividend. As it noted in a press release shortly after the CCAR results were announced: “Capital One’s submission included a planned increase in the quarterly dividend on its common stock from the current level of $0.05 per share to $0.30 per share.” Once implemented, the move will ratchet up the yield on Capital One‘s common stock to 2.2% from 0.4% now.

Equally encouraging from the perspective of an investor in Capital One is how well its capital base held up under the hypothetical stressed scenarios, both with the aforementioned capital return included and without it. As you can see in the figure below, going into last week’s stress tests, the bank had a Basel I tier 1 common capital ratio of 10.7% at the end of the third quarter of 2012. This was worse than the 18-bank average of 11.1%, but nevertheless better than many of its regional competitors. For instance, the analogous ratios at SunTrust Banks , Fifth Third Bancorp , and PNC Financial came in at 9.8%, 9.7%, and 9.5%, respectively.

Source: Comprehensive Capital Analysis and Review 2013: Assessment Framework and Results.

While this base eroded by 330 basis points to 7.4% after the Fed’s apocalyptic economic assumptions were factored into the equation, and a further 70 basis points once the now-approved dividend increase was included, the resulting 6.7% was still comfortably in excess of the 5% regulatory minimum. This is particularly impressive when you consider the size of Capital One‘s credit card portfolio — which by their nature are typically riskier than other types of loan holdings.

Following this news, shares of the McLean, Virginia-based bank are trading up by nearly 1%, outperforming …read more
Source: FULL ARTICLE at DailyFinance

Market Minute: Fed Asks JPMorgan and Goldman for Capital Plans

By DailyFinance Staff

JPMorgan Chase Bank

Filed under: , ,

Banks are in the spotlight after a report from the Fed, and there are new concerns about a diabetes treatment.

Make it 10 in a row for the Dow, the longest winning streak since 1996. The blue chips jumped 83 points yesterday to yet another record high. The Nasdaq gained 13 points and the S&P 500 gained eight. It’s now just two points shy of its all-time high.

(Getty Images)

JPMorgan Chase (JPM) and Goldman Sachs (GS) – two of the nation’s biggest and most prestigious financial companies – were told by the Federal Reserve to submit new capital plans by the end of September. The Fed will then decide if they are in compliance with the rules on capital reserves.

Two other banks, BB&T (BBT) and Ally Financial are temporarily barred from paying dividends or buying back their stock. In all, 16 of the 18 largest banks in the US will be allowed to do so under the Fed’s so-called stress test.

Several of them, including JPMorgan, wasted no time in announcing dividend hikes or stock buybacks. Citigroup (C) and Bank of America (BAC) will repurchase shares, while Wells Fargo (WFC) raised its payout. American Express (AXP), Bank of New York Mellon (BK) and Discover Financial (DFS) will do both.

Elsewhere, federal regulators are worried that newer types of drugs to treat Type 2 diabetes might cause pre-cancerous changes in the pancreas. The drugs are made by Merck (MRK), Bristol-Myers (BMY), Eli Lilly (LLY) and several smaller companies. The FDA says it needs more information to investigate.

Carnival Cruise (CCL) reports quarterly earnings this morning amid another mishap with one of its ships. The company is flying passengers back to the U-S after one of its ships lost power while at a Caribbean port.

Doughnut maker Krispy Kreme (KKD) says its quarterly earnings tumbled from a year ago, even though revenue increased. And retailer Aeropostale (ARO) posted a loss on weak sales during the holiday shopping period. It also surprised the Street by forecasting another loss in the current quarter.

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Source: FULL ARTICLE at DailyFinance

Fed Stress Test Trips Up Some Big Banks' Plans

By 24/7 Wall St.

Bank of America

Filed under: ,

The annual stress tests on the biggest U.S. banks produced a few surprises when the results were announced last night. The capital plans submitted by J.P. Morgan Chase & Co. (NYSE: JPM), Goldman Sachs Group Inc. (NYSE: GS), BB&T Corp. (NYSE: BBT) and Ally Financial were rejected. That means that shareholders are unlikely to receive larger dividends or benefit from increased share buybacks from these banks.

Among the banks getting approval for their capital plans were Citigroup Inc. (NYSE: C) and Bank of America Corp. (NYSE: BAC). American Express Co. (NYSE: AXP) received approval to pare back its stock repurchase plan.

J.P. Morgan already had received approval to repurchase $6 billion in stock and boost its quarterly dividend from $0.30 to $0.38 a share, but the bank’s CEO warned that it may have to cut its plans after it prepares a new capital plan at the end of the third quarter. Goldman will also submit a new plan at the same time.

Bank of America plans to repurchase up to $5 billion in common stock and $5.5 billion in preferred stock. The bank’s quarterly dividend of $0.01 will not change.

Citigroup plans to buy back $1.2 billion in common stock through the end of the first quarter of next year and plans no change to its $0.01 quarterly dividend.

Shares of J.P. Morgan are trading down about 2% in the premarket this morning, at $50.06 in a 52-week range of $30.83 to $51.00.

Goldman’s shares are trading down about 1.6%, at $151.62 in a 52-week range of $90.43 to $159.00.

Bank of America is trading up 3.7% at $12.56, a 52-week high, in a current range of $6.72 to $12.44.

Citigroup is trading up fractionally at $47.50 in a range of $24.61 to $47.92.

Filed under: 24/7 Wall St. Wire, Banking & Finance, Regulation Tagged: AXP, BAC, BBT, C, GS, JPM

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Source: FULL ARTICLE at DailyFinance

Jobless Claims Send the Dow Higher Again

By Jeremy Bowman, The Motley Fool

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Based on the strength of today’s unemployment claims report, the Dow Jones Industrial Average started off strong and held a steady line for the day’s session, finishing up 0.6%, or 84 points, to close at 14,539. It was the first time the Dow broke 14,500, and the blue chips’ tenth consecutive day of gains. The S&P 500, meanwhile, closed just two points away from its all-time closing high, finishing at 1,563, up 0.6% or nine points. Trading was light, as it has been all week, on relatively little news.

Initial unemployment claims continued to decline, falling to 332,000 last week, significantly below economist expectations of 350,000. The four-week moving average, generally seen as a more accurate indicator of the job market, fell to 346,750, its lowest level in five years, indicating the labor market and the overall economy are continuing to improve.

After gaining 1.7% during the day, JPMorgan Chase shares were off 2% after hours after a Senate probe revealed that the banking giant was at fault in the so-called “London whale” that led to a $6.2 billion loss. The Senate subcommittee said that executives at JPMorgan ignored growing risks, and covered up losses from shareholders and government oversight. Carl Levin, the chairman of the subcommittee, said the bank made “many, many failures,” some of which were “serious and indeed egregious.”

Separately, JPMorgan said it would cut its buyback plan in half, to $6 billion over the next 12 months, and raise its quarterly dividend from $0.30 to $0.38, after the Federal Reserve released its decisions on the big banks’ plans to return capital. The Fed cited “weaknesses” in JPMorgan’s plan, and requested resubmission by the end of the third quarter.

Bank of America fared better, jumping 3% after hours, as the Fed approved its plan to repurchase $5 billion in common stock, and $5.5 billion in preferred shares. Bank of America had formerly been under close oversight by the Fed as it struggled to recapitalize following the financial crisis. B of A did not request permission to raise its quarterly dividend, which sits at just $0.01. Banking shares were generally up after hours, because the Fed gave full approval to all 18 lenders under review except JPMorgan Chase, Goldman Sachs, BB&T, and Ally Financial.

Elsewhere, Amazon.com shares took a hit, falling 3.4% after JPMorgan downgraded its rating on the online titan from “overweight” to “neutral.” JPMorgan said it saw gross profit growth slowing as the retailer switches from first-party to third-party sales. Analyst Doug Anmuth expects gross profit growth to drop from 40% in 2012, to 31% this year.

With big finance firms still trading at deep discounts to their historic norms, investors everywhere are wondering if this is the new normal, or whether finance stocks are a screaming buy today. The answer depends on the company, so to help figure out whether JPMorgan is a buy today, I invite you to read our premium …read more
Source: FULL ARTICLE at DailyFinance

Can This Monster Bank Rise Above Its 52-Week High?

By Eric Volkman, The Motley Fool

WFC Chart

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Shares of banking powerhouse Wells Fargo reached a 52-week high on Monday. Let’s take a look at how it got here to find out if the company’s stock price can grow even higher.

How it got here
The immediate spur to Wells Fargo‘s market price was last week’s bank stress test results from the Federal Reserve. To everyone’s relief, 17 of the 18 test subjects passed, some quite easily. Wells was safely within that 17 (in case you hadn’t heard and were wondering, by the way, the one failure was Ally Financial). The passers even included the klutzy incumbents Bank of America and Citigroup , both of whom continue to have their share of problems after emerging from last decade’s financial crisis.

The tests assumed plenty of stress — the key figures the Fed used for its worst-case scenario were an average 4% cratering of real GDP this year, unemployment pole-vaulting over 12% by Q2 2014, and home prices losing 20% of their value in the next two years. That’s not an easy exam to pass, and the fact that nearly all banks made the grade has lifted bullish feeling for the sector as a whole.

It’s also provided a jolt to the stock prices of nearly every winner.B of A, Citi, and Wells have all jumped past the S&P 500 from just before the tests till now. As have fellow big gun JPMorgan Chase and — let’s pick a solid representative among the regional players — BB&T .

WFC data by YCharts.

Nearly all of these stocks are, like Wells, teasing their one-year highs(save for BB&T, which is still a few bucks short of its $34.37 peak ). Yes, even B of A and Citi, who suffer from an apparently chronic shortage of investor love, have traded up recently.

Home equity
Beating the stress test was the most recent in a series of nice wins for Wells Fargo. Since the comeback of the housing market, the company has been driving ahead on the fuel of mortgages. It is, famously, far and away the top housing lender in the country, holding about one-third of the market — and boy, is that market big.

And growing. On a quarter-over-quarter basis alone in its 4Q, Wells Fargo‘s mortgage originations leaped 35%. This helped the bank break its records for net profit — in both the quarter and the full year. For the former, revenue grew 7% on a year-over-year basis to nearly $22 billion, while the bottom line advanced a sweet 24% to $5.1 billion ($0.91 diluted EPS, almost needless to say, another all-time high). The full-year tally was $86.1 billion in top line (6% better than 2011’s result), and a net that popped 19% higher to $18.9 billion ($3.36 diluted EPS).

Not all of Wells’ numbers are so impressive; in spite of the low-rate times we live in, investors would probably be cheered by a higher …read more
Source: FULL ARTICLE at DailyFinance

15 Reasons Bank of America Is a Buy Right Now

By Amanda Alix, The Motley Fool

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Big banks are enjoying some heavy media attention lately as they power through Fed-induced stress scenarios designed to test their strength and mettle. The cause of some of the most intense tongue-wagging is Bank of America , as droves of analysts weigh in on the question of the day: Will the nation’s second largest bank finally be able to pay out a decent dividend?

There’s no doubt that there is strong interest in B of A right now, and investors drove the share price back up above $12 in the hours before the stress test results were released.

If you are wondering whether or not Bank of America is on its way out of the doldrums in which it has been mired for the past few years, read on. I’ve pulled together more than a dozen good reasons why B of A is a buy right now — and it really wasn’t that difficult.

1. Valuation. Using the most recent quarterly data, Bank of America currently trades for about 60% of book value, compared with the industry average of 95%, and a tangible book value of 95%, versus a 133% average. Compared to JPMorgan Chase‘s 98% and 140%, Bank of America looks like a bargain.

2. Earnings. Well, OK, they’re not great, but this is an issue of which CEO Brian Moynihan is acutely aware — and is trying to turn around. He has acknowledged that B of A has been lax in the mortgage lending department and has taken steps to increase that lucrative activity. Doubtless, JPMorgan and Wells Fargo‘s impressive revenues from mortgage origination didn’t escape his notice.

3. CEO Brian Moynihan. History shows that Brian Moynihan is exactly the type of leader that Bank of America needs to pull it out of the melancholy it has been experiencing. It’s been done before, and in my opinion, Moynihan will the guy to do it once again. Not to mention that great hair.

4. B of A is working its way out of the mortgage muddle. Bank of America made a Herculean effort on this point within the past year, settling past and future put-back issues with Fannie Mae, as well as other mortgage-based claims — including one regarding shabby foreclosure practices, signed onto along with fellow miscreants JPMorgan, Wells, Citigroup , and Ally Financial. Of course, the threat of more lawsuits hangs in the air, but progress has definitely been made.

5. Delinquent mortgages are down. In the bank’s fourth-quarter earnings transcript, management noted that 60-day delinquent loans have decreased, and the bank expects that trend to continue throughout 2013.

6. The bank is slimmer than ever. Moynihan’s selling off of non-core assets has so far netted the bank a cool $60 billion, about $12 billion of which has gone toward building capital reserves.

7. Capital reserves are higher than most in the industry. Moynihan has so far pushed his bank’s capital reserves to new heights – 11.1% for the …read more
Source: FULL ARTICLE at DailyFinance

Why Citi is the Big-Bank Winner Today as Bank of America Loses Out

By Alex Dumortier, CFA, The Motley Fool

Filed under:

Buoyed by positive employment data for the month of February released this morning, stocks opened significantly higher this morning, and the Dow Jones Industrial Average (INDEX: ^DJI) looked poised to set yet another nominal closing high. However, the S&P 500
and the narrower, price-weighted Dow
have since fallen back to just above breakeven, up 0.1% and 0.15%, respectively, as of 10:05 a.m. EST.

Banks are OK
The results of the Fed’s third annual round of bank stress tests are in and — drum roll — banks passed! (All but Ally Financial, that is.) Were you expecting anything different? Here’s how the stress test works: The Fed comes up with a hellfire (“severely adverse”) scenario for the economy, and financial markets and banks tot up their expected losses and their capital position under that scenario. The object is to verify whether bank balance sheets can withstand a brutal macroeconomic shock, which, in this case, included:

  • A peak unemployment rate of 12.1% — roughly 50% higher than it is today and 1.4 percentage points higher than the highest rate achieved since 1948.

  • A greater-than-50% decline in stock prices.

  • A 20% decline in housing prices.

Note that the two remaining pure-play investment banks, Morgan Stanley and Goldman Sachs , came in with the lowest stress-scenario capital ratios, barely above the aggregate Tier 1 common equity ratio of 5.6% for the 18 firms at the end of 2008 — just prior to the first round of stress tests in early 2009, which prompted massive raises. The minimum required ratio is 5%. Goldman’s forecast losses under the stress test scenario are $20 billion, above analyst expectations. These results are putting pressure on investment bank shares.

Meanwhile, with respective stress-scenario Tier 1 common equity ratios of 6.8% and 8.3%, Bank of America and Citigroup look in a more comfortable position. For shareholders, that means the prospect of return of capital via dividend increases or share repurchases. Indeed, Citi announced a $1.2 billion buyback over the next 12 months — its biggest return of capital since 2006 — giving the shares a healthy boost this morning. Investors are cheering the news, boosting Citi shares by 1.2%. No word from B of A, whose shares, down 1.6%, are paying the price for this silence.

Bank of America’s stock doubled in 2012. Is there more yet to come? With significant challenges still ahead, it’s critical to have a solid understanding of this megabank before adding it to your portfolio. In The Motley Fool’s premium research report on B of A, analyst Anand Chokkavelu, CFA, and Financials bureau chief Matt Koppenheffer lift the veil on the bank’s operations, including three reasons to buy and three reasons to sell. Click here now to claim your copy.

…read more
Source: FULL ARTICLE at DailyFinance

Unemployment's Fall Pushes the Dow Higher

By Dan Carroll, The Motley Fool

Filed under:

The economy’s giving the Dow Jones Industrial Average a boost into new record-setting territory. The Dow has risen 47 points, or 0.32%, as of 2:25 p.m. EST, riding on the back of strong employment data. Most stocks on the blue-chip index are in the green, and all signs point to a happy ending to this investor-friendly week. Let’s check out the biggest stories on the Dow today.

Jobs rise as financials fall
Optimism over the employment picture fueled the Dow’s early gains and has kept the index in the green ever since. The unemployment rate fell from 7.9% to 7.7% in February, and some analysts see hope that the figure could fall to an even 7% by the end of the year. That’s good news for an economy still emerging from the recession despite stocks’ record gains. Some on Wall Street even expressed fear that the falling unemployment figure could impact the Federal Reserve‘s ongoing stimulus efforts, but that’s unlikely: Fed Chairman Ben Bernanke is sticking to his goal of 6.5% unemployment with the current “QE Infinity,” and America’s still a long way from reaching that lofty mark.

McDonald’s is gaining today, with shares of the fast-food giant up 1.6% to lead the Dow higher. Stronger employment — and thus more money for low- and middle-income consumers — will help boost McDonalds’ lagging revenue. Company sales in February fell less than expected: According to data released today, global sales for restaurants open 13 months or more fell 1.5%, besting analyst expectations of a 1.63% decline. It’s a modest gain for McDonalds, but it’s a sign the company’s plight may be improving — and investors have bought into the optimism today.

Shares of Disney are also on the upswing today, although the 1.6% gain has nothing to do with unemployment. Sales projections have risen for the company’s new box-office release, Oz: The Great and Powerful, the new take on the classic “Wizard of Oz” story. Boxoffice.com raised its expectations for domestic sales by 17% to $75 million for the movie’s opening weekend. Disney needs the movie to do well: Oz cost around $225 million — no chump change, even for a company as large as Disney.

On the other side of the Dow, however, financial stocks are sinking. Bank of America , which always seems to rank among the biggest movers on the blue-chip index, leads all Dow laggards lower, down 1.5%. Rival JPMorgan ranks close behind with losses of 0.9%. The losses come after the Federal Reserve determined that 18 of the 19 financial institutions it put through a stress test are capable of weathering a severe economic downturn; only Ally Financial failed to make the cut. Bank of America came out strong from the test, with its results pushing Edward Jones to upgrade the stock from a “hold” to a “buy” yesterday. Still, investors haven’t bought in yet as the sector as a whole falls.

More gains …read more
Source: FULL ARTICLE at DailyFinance

Were the Stress Tests Too Easy?

By Matt Koppenheffer and David Hanson, The Motley Fool

Filed under:

The results of the Dodd-Frank stress tests came out last night, and shockingly, Ally Financial was the only bank to receive a failing grade. Are these new banking stress tests too easy?

In this video, Motley Fool financials analysts Matt Koppenheffer and David Hanson tell us why all eyes were on Bank of America and Citigroup , how those two banks performed, and why passing grades all around is good news

Many investors are scared about investing in big banking stocks after the crash, but the sector has one notable stand-out. In a sea of mismanaged and dangerous peers, it rises above as “The Only Big Bank Built to Last.” You can uncover the top pick that Warren Buffett loves in The Motley Fool‘s new report. It’s free, so click here to access it now.


The article Were the Stress Tests Too Easy? originally appeared on Fool.com.

David Hanson owns shares of Goldman Sachs. Matt Koppenheffer owns shares of Bank of America. The Motley Fool recommends Goldman Sachs and Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Copyright © 1995 – 2013 The Motley Fool, LLC. All rights reserved. The Motley Fool has a disclosure policy.

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Source: FULL ARTICLE at DailyFinance

CFPB Takes Aim at This Mortgage Player

By Amanda Alix, The Motley Fool

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I suppose it was only a matter of time. When the government settled early last year with Bank of America, Citigroup, JPMorgan Chase, Wells Fargo, and Ally Financial over foreclosure abuses, these lenders were not only instructed to use the $25 billion to assist fraudclosure victims. They were also ordered to revamp their servicing standards, which were also fraught with problems.

Since then, many banks, namely Bank of America, have been selling off their mortgage servicing rights in order to better comply with new capital rules. The beneficiaries of these sales are mortgage servicers such as Nationstar Mortgage , Walter Investment , and Ocwen Financial , all of which have been scooping up these MSRs like there’s no tomorrow.

These companies are growing by leaps and bounds, so I wasn’t particularly surprised to see that the Consumer Financial Protection Board has been hounding Ocwen in regards to its compliance with the servicing terms contained in the National Mortgage Settlement.

Although Ocwen states that it is complying with all requests by regulators, it also notes in its 10-K form that the CFPB, along with the state Attorneys General involved in the settlement and the Multi-State Mortgage Committee, have asked Ocwen to contribute to a consumer relief fund. The servicer declined.

Not the end of the story
Ocwen is the largest of the mortgage servicers, so it’s not surprising that they are being squeezed first. It is also not unexpected because these companies are servicing a large portion of existing mortgages. Despite the company’s assertion that it is against forking over any contributions, Ocwen acknowledges that it may be liable for up to $135 million under the proposal. The servicer also concedes that its reluctance to pony up may end it in a court of law. Ocwen also reported that it had received two civil investigative demands from the Dept. of Justice regarding its new acquisition , Homeward Residential, seeking to resolve questions regarding that unit’s prior participation in the government‘s Home Affordable Mortgage Program.

Ocwen certainly has its plate full, but the other servicers are likely to be next. If Nationstar and Walter also opt out of the consumer relief pool, there may well be a whole lot of legal action going on very soon in the mortgage servicing industry. 

With housing looking peppier than ever this year, these stocks are looking at some long-lasting gains. This puts them squarely within the Motley Fool‘s investing paradigm, which is that the best investing approach is to choose great companies and stick with them for the long term. The Motley Fool‘s free report “3 Stocks That Will Help You Retire Rich” names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.

The article CFPB Takes Aim at This Mortgage Player originally appeared on Fool.com.

Fool contributor Amanda Alix …read more
Source: FULL ARTICLE at DailyFinance

Mortgage Settlement: Step Aside Dimon And Moynihan, Only Ally Has Paid Its Share

By Agustino Fontevecchia, Forbes Staff

As the housing market continues on its slow and painful path to recovery, major banks have been forced to fork over billions in relief for troubled homeowners.  The landmark $19 billion settlement between the Attorneys General of 49 states and five major banks and mortgage originators is on track, and while major names like Bank of America have provided more than $26 billion in relief on a gross basis, while states like California got $17 billion to date, only Ally Financial has managed to meet its obligations.  The ghost of Angelo Mozilo and Countrywide will continue to spook major financials going forward as the housing crisis still weighs on their balance sheets. …read more
Source: FULL ARTICLE at Forbes Latest