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Bank of America to Pay $500M to Settle Investor Lawsuit

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By The Associated Press

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By CHRISTINA REXRODE

NEW YORK — As soon as Bank of America puts one mortgage-related lawsuit behind it, another always seems to rear its head.

The bank announced Wednesday that it would pay $500 million to settle a class-action lawsuit led by pension funds and other investors who say they were misled about $350 billion worth of mortgage-backed investments they bought from Countrywide, a mortgage lender Bank of America Corp. (BAC) bought in 2008. The bank portrayed the settlement as good news because it resolved the bulk of securities claims related to residential mortgage-backed securities.

But financial analysts, in a conference call to discuss the bank’s first-quarter results, peppered bank executives with questions about another pending settlement. Bank of America is still waiting for court approval for a similar settlement it made with Bank of New York Mellon Corp. (BNY) almost two years ago. If it doesn’t get the go-ahead, Bank of America could have to spend more to resolve the claims.

Bank of America’s stock slumped nearly 5 percent to $11.70. While its earnings were just shy of what analysts expected, it was the bank’s latest liability from mortgage lawsuits that “seems to be the big question for investors,” banking analyst Meredith Whitney said on the conference call.

Chief Financial Officer Bruce Thompson told analysts that the bank felt “very good” about settling the pension funds’ lawsuit. But he acknowledged the uncertainty of potential lawsuits and declined to predict how much the bank might have to spend on litigation in the future.

“I don’t think anyone is going to ever, at this point, declare complete victory,” Thompson said, though he added that the bank was moving through “this pipeline of items” in “a pretty meaningful way.”

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Bank of America’s current troubles are the latest fallout from its decision to buy Countrywide, which was known for making exotic mortgages that later went bad as borrowers defaulted. The purchase catapulted the bank into a spot at the top of the nation’s mortgage scene, but it’s been an albatross ever since, bringing lawsuits, investigations and quarterly losses. Hard-to-predict legal expenses have been a bane to Bank of America and throughout the banking industry.

It was just last quarter that two mortgage-related settlements overshadowed the bank’s results. In early January, the bank took a charge of $2.7 billion to settle a dispute with Fannie Mae, which forced Bank of America to buy back mortgages it had sold to the agency before the crisis. It also took a $1.1 billion charge to settle government accusations that it and other banks had wrongfully foreclosed on some homeowners. The charges sent fourth-quarter earnings down sharply.

Brian Moynihan has been wading through issues dating back to the financial crisis ever since he became CEO in

From: http://www.dailyfinance.com/2013/04/18/bank-america-lawsuit/

Business, Finance, Occupation & Industry

American Express Profit Boosted by Higher Cardmember Spending

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By Reuters

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Credit card company American Express Co.’s quarterly revenue came in below analyst expectations as cardmember spending growth remained muted.

Cardmember spending in the first quarter increased 7 percent, adjusted for foreign currency translations. This was the fourth successive quarter of single-digit growth after nine quarters of double-digit growth.

Expense accounts have come under greater scrutiny as companies look to cut costs to protect profit margins, hurting the credit card lender, which gets more than a quarter of its U.S. billed business from affluent corporate customers.

However, American Express‘s billed business was up 6 percent at $224.5 billion and total cards in force crossed 100 million during the quarter.

The company has the lowest delinquency rate among the large credit card companies, including JPMorgan Chase & Co. (JPM), Discover Financial Services, Capital One Financial Corp. (COF), Bank of America Corp. (BAC) and Citigroup Inc. (C).

It set aside $497 million to cover future bad loans in the quarter, 21 percent more than it had provisioned last year, reflecting its larger lending portfolio.

American Express Co. (AXP), which lends directly to consumers and also competes with Visa Inc. (V) and MasterCard Inc. (MA) to process credit card transactions, said global network and merchant services revenue increased 4 percent to $1.3 billion.

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Consolidated expenses during the quarter remained in check, rising marginally, as the company looks to control costs and maintain a leaner operating structure.

The company said in January it would cut about 5,400 jobs as part of a global restructuring and took a related $600 million charge.

Profit for the quarter ended March 31 rose to $1.28 billion, or $1.15 a share, from $1.26 billion, or $1.07 a share, a year earlier.

Total revenue, net of interest expense, increased 4 percent to $7.88 billion.

Analysts on average had expected earnings of $1.12 a share on revenue of $8.03 billion, according to Thomson Reuters I/B/E/S.

American Express shares were marginally down in trading after the bell. They closed Wednesday at $64.13 on the New York Stock Exchange.

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From: http://www.dailyfinance.com/2013/04/18/american-express-earnings/

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Bank of America's Quarterly Profit Soars as Revenues Sink

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By Reuters

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Richard Drew/AP

Bank of America reported a lower-than-expected first-quarter profit and its revenue fell, sending the No. 2 U.S. bank’s shares down 3 percent before the bell on Wednesday.

Net income quadrupled to $2.62 billion, or 20 cents a share, from $653 million, or 3 cents a share a year earlier as expenses dropped and the bank set aside less money to cover bad loans. But total adjusted revenue fell 8.4 percent to $23.85 billion.

Analysts on average had expected Bank of America to earn 22 cents a share, according to Thomson Reuters I/B/E/S.

Bank of America Corp. (BAC) shares dropped 3.3 percent before the bell to $11.88.

Earnings in the year-earlier period were affected by a host of one-time items including a $4.8 billion charge related to the value of its debt.

Chief Executive Brian Moynihan has made progress in building capital and settling mortgage-related lawsuits since taking over in January 2010. But he is under pressure to show that the bank can produce higher earnings at a time of low interest rates, stricter regulations and volatile economic conditions.

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Bank of America, the last of the big four U.S. banks to report results, has pledged to cut $8 billion in expenses by mid-2015 and has said it could reduce expenses in its division that handles delinquent mortgages by $1 billion by the end of 2013.

The bank showed signs of progress in these efforts in the quarter, with total expenses falling 5.2 percent to $18.15 billion.

As with other big banks this quarter, Bank of America results were also boosted by reduced credit losses as borrowers did a better job of making their payments. The bank’s provision for loan losses fell 29.2 percent to $1.71 billion.

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From: http://www.dailyfinance.com/2013/04/17/bank-of-america-earnings/

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JPMorgan Chase Plans to Limit Payday Lenders' Fees

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By The Associated Press

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NEW YORK — JPMorgan Chase said Wednesday that it will take steps to protect its customers from fees and other charges that payday lenders may slap on them.

The bank said it will limit the fees that customers are charged when they overdraft their accounts to make payments to payday lenders.

It will also “enhance communication and require additional training” for employees, to make it easier for customers to stop payments. The bank will also make it easier for customers to close their accounts even when there are pending charges, including payday lender payments.

Payday lenders are a controversial sliver of the financial system. They offer short-term loans, usually targeting the cash-strapped poor. They have high interest rates, making it hard for customers to repay the loans, and the spiral worsens when the payday lenders charge extra fees.

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JPMorgan Chase & Co. (JPM) and other mainstream banks don’t make so-called payday loans. But they do allow the payday lenders access to their customers. The New York Times reported last month that JPMorgan, Bank of America Corp. (BAC) and Wells Fargo & Co. (WFC) allow payday lenders to automatically withdraw money from customers’ accounts, even in states where payday lending is banned. In some cases, the Times reported, the banks allow lenders to tap checking accounts even after the customers have begged for a reprieve.

Ryan McInerney, the bank’s head of consumer banking, said in a statement that the bank intended to protect customers from “unfair and aggressive collections practices.”

“Some customers agree to allow payday lenders or other billers to draw funds directly from their accounts, but they may not know some of the aggressive practices that can follow,” he said.

After the Times story last month, CEO Jamie Dimon described his reaction while speaking at the annual investor conference: “This is terrible, we’re going to fix it.”

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Source: FULL ARTICLE at DailyFinance

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Freddie Mac Sues More Than A Dozen Banks Over Libor Losses

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By The Huffington Post News Editors

NEW YORK (Reuters) – Mortgage finance company Freddie Mac is suing more than a dozen banks for losses from the alleged manipulation of the benchmark interest rate known as Libor.

Bank of America Corp, JPMorgan Chase & Co, UBS AG and Credit Suisse Group AG are among the banks named as defendants in the lawsuit.

Freddie Mac, which invested in mortgage bonds and swaps tied to U.S. dollar Libor, claims the banks colluded to rig the benchmark from 2007 to 2010, according to the complaint, which was filed March 14 in U.S. District Court for the Eastern District of Virginia.

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Source: FULL ARTICLE at Huffington Post

Articles of Interest

Freddie Mac Sues Banks For Libor Losses

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By The Huffington Post News Editors

Freddie Mac sued Bank of America Corp. (BAC), UBS AG, JPMorgan Chase & Co. (JPM) and at least 12 other banks over alleged manipulation of the London interbank offered rate, saying the companies’ conduct caused the mortgage financier substantial losses.

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Source: FULL ARTICLE at Huffington Post

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HSBC Could Lay Off Thousands

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By 24/7 Wall St.

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The restructuring of the financial services industry, which has ranged from 30,000 layoffs at Bank of America Corp. (NYSE: BAC) to cuts at Citigroup Inc. (NYSE: C) and Barclays PLC (NYSE: BCS), has reached multinational HSBC Holdings PLC (NYSE: HBC). According to the Financial Times:

Stuart Gulliver, HSBC‘s chief executive, said when he announced annual results last week that he would “fixate on costs” over the coming year and promised to find a further $1 billion of annual savings in 2013.

The job cuts target has still to be fixed but people close to the bank suggested up to 5,000 staff could go as part of the $1 billion savings plan. If HSBC maintained the recent rate of staff cuts to cost savings, the number would be closer to 10,000.

Shares of HSBC are down fractionally in premarket trading, to $54.40 in a 52-week range of $38.56 to $57.37.

Filed under: 24/7 Wall St. Wire, Banking & Finance, Jobs Tagged: BAC, BCS, C, HBC

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Source: FULL ARTICLE at DailyFinance

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What's Important in the Financial World (3/18/2013)

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By 24/7 Wall St.

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HSBC Job Cuts

The restructuring of the financial services industry, which has ranged from 30,000 layoffs at Bank of America Corp. (NYSE: BAC) to cuts at Citigroup Inc. (NYSE: C) and Barclays PLC (NYSE: BCS), has reached multinational HSBC Holdings PLC (NYSE: HBC). According to the Financial Times:

Stuart Gulliver, HSBC‘s chief executive, said when he announced annual results last week that he would “fixate on costs” over the coming year and promised to find a further $1 billion of annual savings in 2013.

The job cuts target has still to be fixed but people close to the bank suggested up to 5,000 staff could go as part of the $1 billion savings plan. If HSBC maintained the recent rate of staff cuts to cost savings, the number would be closer to 10,000.

Chinese Home Prices

One of the most substantial concerns about the Chinese economy is that inflation in securities, food prices and real estate could create bubbles. The central government has hoped to keep this under control with mortgage rules. Recent data show that has not worked. Bloomberg reports:

China‘s new home prices posted the broadest advance since December 2011, a test for new Premier Li Keqiang as he seeks to prevent a bubble without damping economic growth.

Prices climbed in 62 cities of the 70 the government tracks in February from a year earlier, the National Bureau of Statistics said today. Beijing prices jumped 5.9 percent from a year earlier, the biggest since February 2011, while they advanced 8.1 percent in Guangzhou, the most since January 2011.

Brand new efforts to cool the market go into effect this month. However, they may be no more effective than the slew of such efforts instituted in the past.

Pay-TV Shake Up

Verizon Communications Inc. (NYSE: VZ) wants to turn the model for payment to creators of premium content on its head. Its proposal is to pay based on the audience that shows and movies produce. According to The Wall Street Journal:

Verizon Communications Inc. is proposing to shake up the pay-television business based on a simple premise: it wants to tie the fees it pays to carry TV channels to how many people actually watch them.

Verizon, whose FiOS TV is the nation’s sixth-biggest pay-TV provider, with 4.7 million subscribers, has begun talks with several “midtier and smaller” media companies about paying for their channels based on audience size, according to Terry Denson, the phone company’s chief programming negotiator. He declined to identify any of the media companies.

Under existing arrangements, distributors like cable and satellite operators pay a monthly, per-subscriber fee to carry channels based on the number of homes in which they agree to make the channels available, regardless of how many people watch those channels.

Filed under: 24/7 Wall St. Wire, Market Open Tagged: BAC, BCS, C, HBC, VZ

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Source: FULL ARTICLE at DailyFinance

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Fed Stress Test Trips Up Some Big Banks' Plans

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By 24/7 Wall St.

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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

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Ackman Fires Another Round at Herbalife

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By 24/7 Wall St.

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William Ackman and Pershing Square Capital Management have released another presentation backing Ackman’s claim that Herbalife Ltd. (NYSE: HLF) is indeed a pyramid scheme. This time Ackman compares Herbalife to Fortune Hi-Tech Marketing, a multilevel marketing company that has been charged by the Federal Trade Commission (FTC) with operating an illegal pyramid scheme and falsifying earnings.

The latest presentation from Ackman offers a side-by-side comparison between Fortune and Herbalife, which lifts bits of reports and findings about Fortune and attempts to demonstrate how these accusations apply to Herbalife. The presentation does not include a summary or narrative, and it is a little difficult to follow. Ackman includes documentation that he believes supports his view.

Yesterday a consumer group, the National Consumers League (NCL), sent a letter to the FTC requesting that the agency initiate an investigation into Herbalife, saying that Ackman’s claims suggest that “Herbalife’s business practices may run afoul of many of the ‘red flags’ of pyramid scheme activity in NCL‘s guide.”

A third intervention came in the form of a lawsuit filed by a New York attorney, who wants the federal court to prevent Bank of America Corp. (NYSE: BAC), J.P. Morgan Chase & Co. (NYSE: JPM) and Wells Fargo & Co. (NYSE: WFC) from providing $1.2 billion in financing for Herbalife. In a separate lawsuit, the attorney asks the court to force activist investor Carl Icahn to pay damages and divest his stake in Herbalife on the grounds that Icahn is aiding the alleged fraud. The attorney is a shareholder in the banks and claims they are breaching their fiduciary responsibility to him by not withdrawing the financing to Herbalife. The attorney also holds a short position in Herbalife.

More heat, but more light? Maybe, but the continuing pressure on the FTC works to Ackman’s advantage. If the FTC agrees to investigate Herbalife, the shorts are in line for a nice payday.

Ackman’s new presentation on Herbalife is available here.

Herbalife’s shares are trading down about 1.5% this morning, at $38.33 in a 52-week range of $24.24 to $73.00.

Filed under: 24/7 Wall St. Wire, Activist Investor, Food, Regulation Tagged: BAC, HLF, JPM, WFC

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Source: FULL ARTICLE at DailyFinance

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BofA/ML RIC Report Great For Stocks, Not For Gold & Bonds

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By 24/7 Wall St.

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Bank of America Corp. (NYSE: BAC) is out with its so-called RIC-Report for its clients. There is good news for equity investors, but not such good news for investors in municipal bonds, corporate credit, and even gold. Now that markets have improved drastically, the report is urging investors to be a little more picky about what they invest in. Its four spring investment ideas are including Japanese equities, US housing, technology and copper. Central bank liquidity has soared from $8 trillion to $21 trillion over the past six years and BofA noted that the liquidity tap is still flowing.

The report says, “Some of the most loved asset classes of recent years are now facing significant obstacles in 2013 and beyond. In short, munis may be vulnerable to a cap on interest exemption, higher interest rates are a headwind for corporate credit, and gold could suffer as risk appetite improves.”

The RIC report shows the positioning as very solid for equities despite the bounce. It shows that long-only equity funds have seen close to $550 billion worth of outflows since 2006. The firm’s US equity and quant strategist, Savita Subramanian, noted that pessimism on equities remains at extreme levels relative to history with the Sell Side Indicator down to 46.7 for the first time in seven months in March. Investors may want to pay attention here: When that indicator has historically been below 50, the total returns for stocks have been positive over the following 12 months. How positive is why it is impressive. BofA noted that stocks have performed with a median return of 30% over the period.

The March 12 RIC Report also showed that the consensus expectation for 2013 earnings growth for global equities is at a solid 10%. It even noted, “Even if equities do not replicate their 2012 returns this year, relative to other asset classes, we continue to forecast stocks will offer the most attractive returns in 2013, particularly on an inflation adjusted basis. For 2013, BofA Merrill Lynch Global Research continues to forecast regional equity returns of 10-20%; US, EU and EM credit returns of 2-8%; and G4 government bond returns of -2-2%.”

It said that the firm’s commodity strategists lowered their 2013 and 2014 average gold price forecasts to $1,680 and $1,838, respectively. That will not be good for the SPDR Gold Trust (NYSEMKT: GLD). The team does not expect that gold will reach their $2,000 price target until 2014. Copper is different, and strategist Francisco Blanch sees a small supply deficit in copper this year with exposure noted in miners like Freeport-McMoRan Copper and Gold (NYSE: FCX).

The firm’s Japan equity strategist is Naoki Kamiyama and he has now revised his target higher for the TOPIX to 1,250 from a previous 1,050 and that implies 20% or so upside from current levels. That would translate to good news for the iShares MSCI Japan Index (NYSEMKT: …read more
Source: FULL ARTICLE at DailyFinance

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Bank of America Corp.'s Noncumulative Perpetual Preferred Stock, Series 7 Goes Ex-Dividend Soon

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By DividendChannel.com

On 3/13/13, Bank of America Corp.’s 6.25% Noncumulative Perpetual Preferred Stock, Series 7 (NYSE: BML.PRO) will trade ex-dividend, for its quarterly dividend of $0.3906, payable on 3/29/13. As a percentage of BML.PRO‘s recent share price of $25.50, this dividend works out to approximately 1.53%, so look for shares of BML.PRO to trade 1.53% lower ? all else being equal ? when BML.PRO shares open for trading on 3/13/13. On an annualized basis, the current yield is approximately 6.12%, which compares to an average yield of 5.48% in the “Financial” preferred stock category, according to Preferred Stock Channel.
Click here to learn which S.A.F.E. dividend stocks also have preferred shares that should be on your radar screen » …read more
Source: FULL ARTICLE at Forbes Markets

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Reality Check: The DJIA Highs Are Partly a Sham, Five Big Drags with Runner-Up Drags

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By 24/7 Wall St.

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The news of the Dow Jones Industrial Average hitting new highs this week is certainly good news. The problem is that the news comes with some serious caveats. We just featured that there are really only seven of the 30 DJIA component stocks that would be needed to take the DJIA up even higher to 15,000. The rest of the market could stay the same, but there are some serious DJIA laggards that have to be considered when you see that the market is back to all-time highs.

General Electric Co. (NYSE: GE) is perhaps the biggest disappointment of all DJIA stocks. After all, GE probably represents the broad economy more than any other single DJIA stock. It has business and personal finance, oil, power, energy, appliances, health care and many other aspects covering each sector of the economy. At $23.75, and with a market cap of about $245 billion, GE‘s stock is barely half of its share price from late 2007, and on the chart its stock would have to rise about 150% before taking out the 2001 highs back when valuations were silly at about 30 times earnings. GE has recovered well over 200% from its lows, but it its share price and market value are a fraction of the peak before the recession.

Bank of America Corp. (NYSE: BAC) may have been the best DJIA stock of 2012, but it is a shell of its former glory, if you count the price of the stock after the recession. In 2006 and in 2007 Bank of America was a $40 and $50 stock. Even after doubling from its lows, and even backing out a few dollars worth of dividends since then, has the stock at $11.84. It is very possible that Bank of America may not see its old highs for a generation or more, even if Warren Buffett and Berkshire Hathaway Inc. (NYSE: BRK-A) have a large stake. Its market cap is $128 billion, and it seems hard to imagine that shares would rise 200% to 300% further in any short period without hyperinflation.

Hewlett-Packard Co. (NYSE: HPQ) cannot win for losing, and it has been losing. This is not even due to the recession, but due to a change in technology demand toward Apple Inc. (NASDAQ: AAPL) and to smartphones and mobile computing. Mismanagement was another nail in the coffin, and even Meg Whitman has warned that the turnaround might not be seen fully until 2015 or so. The good news is that shares are actually back above $20, and that is approaching a double off of the lows of 2012. The bad news is that HP was basically a $50 stock back in 2010 and early 2011, when Mark Hurd was in charge. That company has been lost ever since Hurd was canned.

Alcoa Inc. (NYSE: AA) is another huge drag on the DJIA. Its stock is around $8.50 now and only has a …read more
Source: FULL ARTICLE at DailyFinance

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Bank Stress Tests Countdown Begins, Dividends &amp; Buyback Approvals Await

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By 24/7 Wall St.

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We are now within ten days of the release of the Federal Reserve‘s new round of stress tests on how the nation’s largest banks will do if (or when) the economy goes back into a downturn. The good news is that most banks are expected to pass the tests. Of the questionable ones, they are still not expected to face any added regulatory pressure.

There is a good-news bad-news argument here. Dow Jones showed a decision by the Federal Reserve that will make the stress tests released on next Thursday. The Fed’s formal decision on which banks will be freed up to increase returning capital to shareholders via higher dividends and buybacks will not be for another week.

Read Also: The 7 Safest Banks in America for 2013

The too-big-to-fail banks like Bank of America Corporation (NYSE: BAC) and Citigroup Inc. (NYSE: C) remain as “challenged” or “problem” banks but how they will do in the stress test remains up for debate. That being said, we cannot go out on a limb and assure readers that the Federal Reserve will allow either one of these banks to increase dividends and share buybacks. The reality is that they are likely in a fine spot to do so, but reality and regulation have not normalized between each other yet.

Bank of America Corp. (NYSE: BAC) has a yield of only about 0.4% and Citigroup Inc. (NYSE: C) yields only 0.1%. Our take remains the same as before that BofA may get to increase its payout before Citi. Still, that is opinion rather than fact. There are still many pending legal cases against BofA from borrowers and from various government agencies and trading partners. If these banks are not allowed to lift their dividends this year, then we would almost certainly expect that to take place in 2014.

We do expect that J.P. Morgan Chase & Co. (NYSE: JPM) will be allowed to increase their dividends and buybacks again now that the dust settled after the London Whale losses have been realized. Due to J.P. Morgan’s fortress balance sheet, even the strictest of regulators probably understands that this was a line-item now that did not really jeopardize taxpayers, depositors, and trading partners. Things are strong enough at Wells Fargo & Co. (NYSE: WFC) that they already jumped the gun and raised their dividend early this year.

Here are some other banks which may have a shot at dividend hikes or resuming some share repurchase programs:

Regions Financial Corp. (NYSE: RF) has a $11.2 billion market cap and only a 0.5% dividend yield. We went back and saw that Regions cut the payout from $0.38 to $0.10 in 2008 and then in 2009 it cut that payout from $0.10 all the way down to only $0.01 per share per quarter.

SunTrust Banks, Inc. (NYSE: STI) has a $14.99 billion market cap and only a 0.7% common stock dividend yield. This bank raised its payout to …read more
Source: FULL ARTICLE at DailyFinance

Business, Finance, Occupation & Industry

Bank Lending: Part of the Problem or Part of the Solution?

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By 24/7 Wall St.

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The conventional wisdom says that low interest rates encourage banks to lend more because more borrowers come knocking on the door. So why, when the Fed funds rate is as close to zero as it is ever likely to be, has bank lending declined?

A new working paper from the National Bureau of Economic Research (NBER) offers some data to try to answer that question. Titled “Banks Exposure to Interest Rate Risk and The Transmission of Monetary Policy,” the NBER report indicates that the country’s largest banks have reduced their outstanding loans, most likely for the very good reason that lending money at very low interest rates is not profitable.

The big banks largest customers — U.S. companies — have gone to the bond markets for needed financing and have taken advantage of the low interest rates without help from the banks.

Smaller banks have behaved in a more traditional way and have increased their lending. Lending at Citigroup Inc. (NYSE: C) fell from $604 billion in 2011 to $601 billion in 2012. At Bank of America Corp. (NYSE: BAC) lending fell 2% in 2012, to $912 billion, according to a report in Fortune. At Apple Bank of Savings, however, the 100th largest bank in the United States, lending rose 58% in 2012.

One thing cheap money has accomplished is to boost equity prices, and today’s highest-ever Dow level is testimony to that. When interest rates begin to rise again, then the big banks will resume lending and equity prices may pull back. But we are likely to have to wait at least another year to see if that happens.

Filed under: 24/7 Wall St. Wire, Banking & Finance, Economy, Research Tagged: BAC, C

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Analysts Remain Very Bullish on MLPs (EVEP, MEMP, LGCY, BBEP, KYN, SRV, CS, BAC)

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By 24/7 Wall St.

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The MLP research team at Credit Suisse Group (NYSE: CS) are still firm believers in their “catch-up” rally slogan. Master limited partnerships (MLPs) underperformed the S&P 500 in 2012 for the first time since 1999, with the Alerian MLP Index (AMZX) gaining 4.8% versus 16.1% for the broader market. MLPs have made up ground thus far in 2013 and look to continue their solid progress. In a report issued today, Credit Suisse upgraded one MLP, and we also highlight other favorite MLP stocks to buy.

EV Energy Partners L.P. (NASDAQ: EVEP) gets the nod today as it is raised to Outperform from Neutral. The Credit Suisse team also raises their price target to $57.50 from $52.50. This is way below a very aggressive Wall St. consensus price target of $68. The current yearly distribution is $3.07 per year, for a 5.90% yield. MLP distributions often include return of principal.

The MLP analysts at Bank of America Corp. (NYSE: BAC) also have joined the growing chorus of those suggesting MLP stocks for their customers seeking solid, dependable income streams. In a recent research piece, the analysts pointed out that MLPs are attractive from an income and growth perspective, providing investors yield and return potential. They were positive on higher yielding MLP names. Here are three of them.

Memorial Production Partners L.P. (NASDAQ: MEMP) is a Houston-based MLP that has one of the highest distributions currently available. Paying $2.03 per unit, that translates to a 11.00% yield. The Thomson/First Call consensus price target is $21.50.

Based in west Texas, with properties in the Permian Basin, Mid Continent and the Rocky Mountain regions, Legacy Reserves L.P. (NASDAQ: LGCY) is another top Bank of America MLP pick. With a solid 8.60% distribution to unit holders, it has a consensus price target of $31.

Breitburn Energy Partners L.P. (NASDAQ: BBEP) another high yielding name, is a West Coast-based MLP that pays unit holders $1.88 per year, which equals a 9.80% yield. The consensus price target is $22.

As we have pointed out before, the advantage to owning MLPs in an investor portfolio is that they often present one of the best total return opportunities. These three high-yielding individual names could offer just that. Investors seeking diversification in the space may also want to look at the Kayne Anderson MLP Investment Co. (NYSE: KYN) or the more aggressive Cushing MLP Total Return Fund (NYSE: SRV). Both are exchange traded funds (ETFs) that offer a basket of MLPs.

Filed under: 24/7 Wall St. Wire, Analyst Calls, Oil & Gas Tagged: BAC, BBEP, CS, EVEP, KYN, LGCY, MEMP, SRV

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Banks Hopeful for Dividend Hikes and Stocks Buybacks

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By 24/7 Wall St.

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In the coming weeks, the financial sector may move from worrying about the spending sequestration to the coming stress tests of the 19 major banks in the United States. We recently covered the Seven Safest Banks in America for 2013 and that list may get to be expanded handily in 2014 after the result of the stress tests.

At issue is that the banks are expected to pass these tests. If so, there is going to be one serious advantage that has not been there in years. That will come from returning capital to the shareholders. Companies like Bank of America Corp. (NYSE: BAC) and Citigroup Inc. (NYSE: C) have such low dividend yields that they might as well not be counted as dividend payers at all. Some of the banks likely will be freed up to begin returning capital via higher dividends and common stock buybacks.

Bank of America Corp. (NYSE: BAC) has a yield of only 0.36% and Citigroup Inc. (NYSE: C) yields only 0.1%. Our take is that Bank of America may get to increase its payout before Citigroup, but that may be solely due to management remaining the same. There are still many pending legal cases against Bank of America from borrowers and from various government agencies and trading partners. If these banks are not allowed to lift their dividends this year, then we almost certainly would expect that to take place in 2014.

Here are some other banks that may have a shot at dividend hikes or resuming some share repurchase programs:

  • Regions Financial Corp. (NYSE: RF) has a $10.8 billion market cap and only a 0.52% dividend yield. Regions cut the payout from $0.38 to $0.10 in 2008, and then in 2009 it cut that payout from $0.10 all the way down to only $0.01 per share per quarter.
  • SunTrust Banks Inc. (NYSE: STI) has a $14.7 billion market cap and only a 0.72% dividend yield. This bank raised its payout to $0.05 per share quarter from $0.01 in mid-2011, but that has been static ever since at the one-penny level.
  • Zions Bancorp. (NASDAQ: ZION) has a $4.4 billion market cap and only a 0.17% dividend yield. This dividend fell from $0.43 to $0.32 per share per quarter very briefly in 2008 and then down to $0.04 for two quarters before the dividend fell down to $0.01 per share quarter, where it has been since mid-2009.

The good news is that most banks are expected to pass the stress tests. The bad news is that merely passing a stress test does not come with assurances that the Federal Reserve will allow these banks to automatically hike dividends and begin repurchasing common stock.

Filed under: 24/7 Wall St. Wire, Banking & Finance, Corporate Governance, Dividends & Buybacks, Regulation Tagged: BAC, C, RF, STI, ZION

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Short Interest Wanes in Some Big Stocks (GE, NOK, BAC, VZ, ANR, MCD, AAPL, RIMM, MSFT, DELL, GMCR, CSCO)

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By 24/7 Wall St.

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We have tracked the key short interest changes as of February 15 in the following large cap stocks: General Electric Co. (NYSE: GE), Nokia Corp. (NYSE: NOK), Bank of America Corp. (NYSE: BAC), Verizon Communications Inc. (NYSE: VZ), Alpha Natural Resources Inc. (NYSE: ANR), McDonald’s Corp. (NYSE: MCD), Apple Inc. (NASDAQ: AAPL), Research in Motion, Microsoft Corp. (NASDAQ: MSFT), Dell Inc. (NASDAQ: DELL), Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) and Cisco Systems Inc. (NASDAQ: CSCO).

General Electric Co. (NYSE: GE) short interest rose 6.4% to 77.96 million shares. About 0.7% of GE’s float is now short.

Nokia Corp. (NYSE: NOK) saw short interest fall by 2.7% to 330.97 million shares, about 8.8% of the company’s total float.

Bank of America Corp. (NYSE: BAC) short interest rise 10.3% to 166 million shares, which represents 1.5% of the company’s float.

Verizon Communications Inc. (NYSE: VZ) saw a 3.8% rise in short interest to 47.05 million shares, which represents about 1.6% of the firm’s float.

Alpha Natural Resources Inc. (NYSE: ANR) showed a rise of 3.6% in short interest, to 33.13 million shares, about 15.2% of Alpha’s float.

McDonald’s Corp. (NYSE: MCD) showed a rise of 12.5% in short interest, to 13.92 million shares, about 1.4% of the company’s float.

Apple Inc. (NASDAQ: AAPL) saw a short interest fall by 0.4% to 18.78 million shares, or 2% of the company’s float.

Research In Motion changed its name to BlackBerry (NASDAQ: BBRY) on January 30, and short interest for this period was reported under the old name and ticker symbol RIMM. It saw short interest rise by 5.4% to 136.51 million shares, or 27.6% of the total float.

Microsoft Corp. (NASDAQ: MSFT) posted a 4.4% rise in short interest, to 83.58 million shares, about 1.1% of Microsoft’s float.

Dell Inc. (NASDAQ: DELL) short interest fall by 30.1%, to 28.73 million shares or about 2% of the company’s float.

Green Mountain Coffee Roasters Inc. (NASDAQ: GMCR) saw short interest increase by 13.9% to 30.89 million shares or 25.4% of the company’s float.

Cisco Systems Inc. (NASDAQ: CSCO) saw short interest fall by 3% to 55.11 million shares or about 1% of the company’s float.

Short interest in Dell has declined dramatically again following the buyout offer from Michael Dell and his partners. The rise in BlackBerry’s share price has brought more short interest because few people really believe the new smartphones will make much of dent in the armor of Apple, Google Inc. (NASDAQ: GOOG) or Samsung. GE’s rise in short interest is likely due to investors’ belief that the stock is fully valued and prospects are dimming as the global economy continues its slow motion recovery.

Filed under: 24/7 Wall St. Wire, Large Cap Stocks, Short Interest Tagged: AAPL, ANR, BAC, CSCO, DELL, GE, GMCR, GOOG, MCD, MSFT, NOK, RIMM, VZ

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Business, Finance, Occupation & Industry

U.S. judge puts AIG/NY Fed case on hold, BofA case goes on

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A new sign is displayed over the entrance to the AIG headquarters offices in New York's financial district

NEW YORK (Reuters) – A federal judge has put American International Group Inc's dispute with a financial crisis-era bailout vehicle on hold, while another court addresses the insurer's separate $10 billion lawsuit against Bank of America Corp over defective mortgages. But in rejecting AIG's effort to litigate quickly against the Maiden Lane II vehicle created by the Federal Reserve Bank of New York, U.S. District Judge Lewis Kaplan said that “on the face of it” some of the New York Fed's and Maiden Lane's actions “perhaps are unattractive and, indeed, wrongful. …

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