Interest Rate Roundup

Tuesday, July 22, 2008

The bank warnings parade continues

More and more banks and lenders are stepping up to the podium and warning about loan losses, increased provisioning, dividend cuts, and worsening economic conditions. Some of the bottom line results have been better than expected, leading to sharp, short-term stock rallies. But fundamentally, even those reports were generally negative -- just slightly less negative than people were looking for. Here's a quick roundup of today's greatest hits (with my emphasis added in parts):

From an AP story on American Express:

"In a sign that even wealthier consumers are feeling the pinch of the credit crisis, American Express Co. said its second-quarter profit tumbled as it set aside more money to cover souring loans across all its portfolios.

The credit card lender, known for catering to America's elite, said late Monday that its second-quarter earnings fell 38 percent, well below Wall Street's expectations.

The effects of the weakening economy were evident even among its more established members with excellent credit.

"Consumer spending slowed during the latter part of the quarter and credit indicators deteriorated beyond our expectations," American Express Chairman and Chief Executive Kenneth I. Chenault said. "The scope of the economic fallout was evident even among our longer term, superprime cardmembers."

The company's shares shed $4.65, or 11.4 percent, to $36.25 in aftermarket trading. They are down about 21 percent for the year.

For the period ended June 30, American Express reported net income of $653 million, or 56 cents per share, compared with $1.06 billion, or 88 cents per share, in the year-ago period.

Analysts, on average, expected earnings of 83 cents per share, according to Thomson Financial.
The results include a $374 million addition to credit reserves, reflecting higher credit losses and the expectation for increased write-offs in the third and fourth quarter.

The company's U.S. card services division reported a profit of just $21 million, down from $580 million a year ago. Revenue net of interest expense in the segment rose a modest 1 percent to $3.6 billion. Results were hurt by a $1.5 billion provision for loan losses, up from $640 million in the 2007 quarter."

From a TheStreet.com story on Wachovia:

"Wachovia shares were plunging more than 9% in premarket trading after the troubled bank posted a nearly $10 billion second-quarter loss and slashed its dividend.

The Charlotte, N.C.-based bank recorded a loss of $8.9 billion, or $4.20 a share, compared to a profit of $2.34 billion, or $1.22 a share, in the year-earlier period. Analysts, according to Thomson Reuters, expected the firm to post a loss of 78 cents a share.

The loss included a $6.1 billion non-cash goodwill impairment charge in commercial-related sub-segments reflecting declining market valuations and asset values. Wachovia said the goodwill impairment charge has no impact on its tangible capital levels, regulatory capital ratios or on liquidity.

Excluding the goodwill impairment charge and a merger and restructuring expense of $128 million, Wachovia posted a net loss of $2.67 billion, or $1.27 per share.

The company also took a $5.6 billion provision to cover net charge-offs and increase the reserve by $4.2 billion, it said."

From an AP story on Regions Financial:

"Regions Financial Corp. said Tuesday its second-quarter profit dropped 55 percent, below Wall Street expectations, as it set aside more than $300 million to cover bad loans.

For the quarter ended June 30, the bank reported net income of $206.4 million, or 30 cents per share, compared with $453.3 million, or 63 cents per share, in the year-ago quarter.

Excluding the impact of $100.1 million in pretax merger-related expenses, income from continuing operations was 39 cents per share, compared with 69 cents per share in the prior-year quarter.

Analysts polled by Thomson Financial, on average, anticipated earnings of 42 cents per share. Analyst estimates typically exclude one-time, unusual charges."

1 Comments:

  • Poor earning reports from the financial sector? What happened?
    Sarcasm aside, all of these guys knew the mortgage boom was going to end badly yet they ALL continued to throw more money onto the fire. I do not feel sorry for them one bit as their continued recklessness during the boom has only served to make things worse for themselves - they now must reap what they have sown. I only hope that they're not going to take the rest of us down with them

    By Anonymous cklimen, at July 22, 2008 at 12:06 PM  

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