books the bedroom
marika
it's different from 03,
But there is something going on with the news and I can't access it.
I will have to try at home
mk5000
Financial Stocks Take a Beating
Brokerages are set to report earnings, and analysts expect more bad news
By Kirk Shinkle
Posted March 17, 2008
Brokers and banks continue to watch financial share prices plummet after
JPMorgan Chase agreed to buy Bear Stearns, the fifth-largest U.S. investment
bank, for a meager $2 a share. The deal, which included emergency financing
provided by the Federal Reserve, is the latest rout amid continuing fallout
from shaky subprime lending that sparked the current credit crisis and
continues to paralyze large chunks of the lending market. Bear's shocking
sale price illustrates just how difficult it is to value any major financial
institution during this crisis. It traded at $30 on Friday.
The greatest menace now is of more failures, near or actual-and that the one
just witnessed at Bear will eventually be remembered as the first domino of
many.
This week, America's biggest brokers and investment banks are set to report
earnings. It is an unenviable position. Expect more pain to be added to the
estimated $400 billion in estimated losses already anticipated in the wake
of last year's collapse of the residential real estate market.
So what should we expect from those earnings calls? "Significant
writedowns," says Frank Scaturro, a vice president at Thomson Financial.
"It's daunting, but they may be freer now with all this acrimony already in
the marketplace."
At the same time, all of Wall Street will be watching to see if the Fed's
efforts to keep capital flowing have had the desired effect. The Fed helped
finance the JPMorgan-Bear deal, cut rates on direct loans to commercial
banks, and agreed to let primary dealers borrow in exchange for a "broad
range" of collateral. The hoped-for impact will be a recovery in lending.
"I think we're at the crescendo of this crisis," says Dick Bove, a veteran
bank analyst at Punk, Ziegel. "Basically, over the next three to four days,
all of the guarantees the Fed has provided are going to be tested. If the
Fed is able to maintain the stability of the market, then the tests will
satisfy the sellers, and we'll go back to a more normal functioning in the
financial markets."
If not, there's little room to hope for any good news in the sector. Rumors
of trouble are already flying at some of the best-known names on Wall
Street, especially those firms with large exposure to the subprime market.
Shares of Lehman Bros. were down 19 percent Monday even after its CEO
Richard Fuld said in a statement that the Fed's weekend decision to lend
directly to primary dealers "takes the liquidity issue for the entire
industry off the table." Goldman Sachs, Merrill Lynch, and Morgan Stanley
all fell by a smaller margin.
Worse off were the likes of National City and Washington Mutual, where
subprime exposure is a larger worry. Their shares plunged more than 42
percent and 12 percent, respectively. Following the Bear announcement,
analysts at Oppenheimer predicted financials could drop 50 percent more.
Also, despite Fed intervention, more bank failures are expected. Merrill
Lynch has said that consolidation among big banks could be massive and that
"Bear Stearns' demise should probably be viewed as the first of many."
Analysts note that in the 1989-91 downturn, a quarter of financial sector
companies merged, were acquired, or went bankrupt. So far, only about 7
percent of the sector has disappeared this time.
Looking ahead, Bove says some traditional banks could benefit as the market
improves, gaining traction, thanks to market share gains from larger rivals
in the brokerage sector that have fallen victim to the credit crunch.
Analysts at Keefe, Bruyette & Woods see opportunity in the
government-sponsored lenders like Fannie Mae and Freddie Mac down the road,
provided they can raise capital and expand their investments.
But neither expects a hefty rebound in the sector for some time. Given
Monday's market turmoil, ongoing credit-related losses, and future
expectations that the government will step in to regulate the financial
sector with a heavier hand, there's little reason to predict banks will stop
weaving soon.