Category Archives: Retail Lifestyle

Bank results week: Wells Fargo profits from the weak

Wells Fargo used 2009 as a good time to review its national footprint and with Wachovia in its belt used the time to grow its retail presence and cement a leadership position that now threatens BofA directly

Also a couple of tricks of the trade, kept it more profitable than most in its competitor set, using the now derogatoy ‘Proprietary Trading’ desks to hedge with mortgage securities

MARKETWATCH.COM

In investor-speak, that means Wells Fargo, which has 6,600 branches in 39 states, purchased investments that pay off when short-term rates fall–which is exactly the action central bankers have taken to keep credit flowing during the financial crisis.

Wells Fargo reported a profit of $2.82 billion or 8 cents a share for the 4th Quarter up 92 cents a share from the year ago results. The bank reported revenues of $88.7 billion for 2009, producing $12.7 billion in income and the 4th quarter results were well ahead of expectations

MORTGAGE WARS: Wells Fargo vs Bank of America

In the fourth quarter, Wells Fargo originated $94 billion in mortgages while Bank of America originated $84 billion, up sharply from the volume of mortgages they made in the fourth quarter of 2008 at the depths of the financial crisis. According to trade publication National Mortgage News, the two banks accounted for 40% of new mortgages in the third quarter of 2008, the latest period for which information is available. They have similarly dominant positions in the servicing of mortgages.

After this, the war is now heavily tilted in favour of the west coast headquartered Wells Fargo, with Citi struggling to keep up with both. Wells Fargo was never under the pay czar’s administration and despite a 47 cent loss from a $25 b repayment in the fourth quarter, did not tailspin like the other two

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Bank Results Week : BofA reports troubled 2009

BofA is doing well if for the fact that it has already returned all government monies and has provisioned another $1.6 billion for Credit Losses

As a new habit, we will continue to use the NY Times summary ( No it’s not Scott :) )

Even as the nation’s largest financial institutions report whopping profits from their investment banking units, those with major consumer lending portfolios continue to bleed money as unemployment and a weak housing market hamper people’s ability to repay their debts.

On Wednesday, those losses posed a fresh threat to Bank of America, which reported a fourth-quarter net loss of $5.2 billion, or 60 cents a share, compared with a net loss of $2.4 billion, a year earlier. Analysts surveyed by Bloomberg had expected a loss of 52 cents a share.

For the year, the bank lost $2.2 billion or 29 cents a share compared with a profit of $2.6 billion or 54 cents in 2008.

The bank, which acquired Merrill Lynch in 2008 at the height of the crisis, said its total assets soared to $2.4 trillion at the end of 2009 from $1.9 trillion a year earlier.

via BofA losses

The rise in 2009 total assets is good, the fourth quarter loss is just $194 million after TARP payback but overall the card portfolio ( yes, MBNA as we knew it) is by itself $4.9 billion and total write downs have risen to a huge $33 billion from less than half the amount for 2008. Also, BofA and Wells Fargo tomorrow will not have the luxury of international business anymore. However, Wells Fargo is competitive and profit-making. Without HHI, Moynihan would probably continue in a state of suspended thinking and BofA must suffer in 2010 as a result. the ML acquisition is not bringing in ny benefits with top executives walking out and global results affected by well Merrill Lynch.

Bank of America is good at retail banking and even traditional Commercial Banking however, and its trained , much prized employees could still show Wells Fargo a thing or too.

What’s the deal with Cadbury?

It get’s wierd(er). I am flummoxed. Let me bite into a little late night chocolate. Searing hot.

One would have thought, esp the fat cat bankers and the Bens, that Cadbury’s needed a richer valuation. As the story unfolds however, there seems to be more than what meets the eye.[picapp align=”right” wrap=”false” link=”term=FUDGE&iid=5140001″ src=”d/4/9/6/closeup_of_a_3b19.jpg?adImageId=9179782&imageId=5140001″ width=”120″ height=”120″ /]

Nestle backing Kraft did not bring extra cash from Kraft and with Buffet watching, nothing more is likely to happen. However the counter offer for 790p or $12.80 as mentioned by Hershey’s today shows a rather bankrupt chocolate bank. I thought only one would be Charlie’s Willy Wonka. All the players are strapped for Cash, the market is growing, the health foods market is not hurting the Chocolate segment, i don’t see where it needs Willie wonka to save Charlie Cadbury.

But Cadbury is obviously out-of-pocket and cannot fund itself through a Management buy out, neither are the numbers interesting enough for PE. It seems like PE funds are passing on this one maybe because they do not read their stuff here. More chocolate dinners for them please. Transformers? Anyone? with a nice movie to curl up with , of course..[picapp align=”left” wrap=”true” link=”term=Chocolate+production&iid=5255854″ src=”3/c/f/1/Close_up_of_6a46.jpg?adImageId=9179945&imageId=5255854″ width=”120″ height=”120″ /]

I think the like of Bronson Point are obviously busy with bigger prey, but there are others who can help Philip Cadbury out of this predicament and continue growing the market. They were a very happy lot after announcing results in the local India office, esp as India and China continue to recruit in MNCs so we can be happy when things don’t move and we can get on with selling. I’m still waiting for the next offer myself.. I need that job for growing India’s brilliant consumer economy.[picapp align=”center” wrap=”true” link=”term=Cadbury%27s&iid=7312398″ src=”3/f/0/6/Cricket_Field_at_0be5.jpg?adImageId=9179974&imageId=7312398″ width=”120″ height=”116″ /]

But, as of now, Ben applied first and Warren Buffet does like fudge. coming back to PE front, no, emerging market desks here are unlikely to be interested because there is so much in infrastructure and IT, so much in existing brands that need to grow 2-3X from a large established base at ITC, Unilever and P&G apart from Pepsi and Coke. And Britannia, Fonterra, Kraft itself with the unhurt Nestle and the OTC pharma specials from the big 4.

And the issue was..cash. Of course, they might even need more cash to counter the Diamond Foods campaign in the Superbowl, and Irene wouldn’t overspend. Hershey’s is too small to play with Cadbury, but it shows how much Kraft is under-spending when cottage industry players like Hershey’s that have a niche like Swiss Cheese, no go on this deal.

Where the Infrastructure Dollar went?

2009 was the year of the stimulus for the US. Though the Capitol talked mostly only about stimulus in terms of funds for highways and on setting up of recovery.gov, We started taking notice by June that indeed it was hard to track and hard to estimate..a lot of state and some police projects were awarded at the level of county and job savings ascribed to each to get to recovery.gov. Not entirely accurate but definitely a notch or two better than any other spending program i know. The rest of the jobs program will be best utilised probably by the same jobs..new roads, highways that needed even just guard rails, railway infrastructure.

In February, Obama made whistle-stop tours and exhorted the people to see how much they needed these highways and bridges, and how these were unfinished business:

Mr. Obama is proposing what he says is the largest increase in infrastructure spending since President Dwight Eisenhower created the Interstate Highway System in the 1950s.

“We will invest more than $100 billion and create nearly 400,000 jobs rebuilding our roads, our railways, our dangerously deficient dams, bridges and levees,” he said.

The president said funding infrastructure projects will also help create jobs in other areas of the economy. He specifically mentioned the Caterpillar company, which makes much of the heavy equipment used in road projects. Caterpillar recently announced more than 20,000 layoffs.

“And today, the Chairman and CEO of Caterpillar said that if the American Recovery and Reinvestment Plan passes, his company would be able to rehire some of those employees,” he said.

via VOA

By July, we were comparing dollars at each city:

Track These At Recovery.Gov In Time | NY Times

The NY Times story here was obviously received well because of the graphics and the comparative data, much of which may need to be reworked now. A look at recovery.gov shows 40-45% of the funds being drawn by county programs such as the 11921 awards in California, mostly grants and around 10% ($1.3 billion ) in contracts, going to police stations buying LCD Flat screen TVs and Crowd Control System upgrades, waste water collection systems, increase health center services and presumably the roads, bridges and the highways.

Out of the $158.7 billion awarded ( 58%) 13% has been received and more can probably be done now in receiving those funds and working out what is wrong with the process.

Nonetheless, many in the developing world and even Europe could also use the recovery.gov example to start cleaning the Augean stables of public works. Well begun is half done. But with only 12000 jobs related in Arizona and jobs being reported in fictional districts, well..someone needs to figure out what is wrong and fix it. Similarly Texas has only reported 20000 jobs created and the country as a whole is already reporting 600000 jobs created by the stimulus..obviously not going to match with the rising unemployment numbers..and i haven’t heard from any of these folk on twitter..strange?

In California, almost 45% has been allocated by the Department of Education ( 8 out of 18 billion )  and more than 15% to the Department of Transportation – Have people really seen these half a million jobs making a difference? Have these funds to school districts saved the schools or the teachers? There however the reports are still missing, probably dwarfed by the enormity of the task involved

An example of the agency wise allocation is in the included screen grab for Alabama on the right. It is a great time for people at these agencies to get back with the results. America needs it before going on another joyride with public funds. If you go by these statistics the journos at Reuters have done a pretty ‘funny’ piece with the stats

The second stimulus program may just be going the wrong way without a detailed success/failure report on the first one.

The new Jobs program

The “Jobs for Main street” , Whitehouse’s own repartee to the Wall street cats, is equally unrepentant getting another $40 billion for Department or Transportation, to teach us the ‘new deal’ all over again. The ARRA year has gone by and we are still thinking about another set of roads that will be up in ‘120 days’. I thought the overwhelming majority passed it because it was creating jobs? Especially now with the shadow inventory showing, it is time to tread a little cautiously and on sure footing not ‘sidings and tarpools’ The ARRA bill already has 7886 transportation projects underway.

An example of others who could have got the money is below from The Huffington Post

Demand for high-speed rail funding has well exceeded the expectations that existed when the recovery bill was signed last year. Currently, there are close to $60 billion in project applications from more than 30 states competing for the first $8 billion in federal high-speed rail funding, which will go out in a few months. Domestic and foreign investors and private industry have taken notice of the government’s initiative and the sector has exploded over the last few months, providing hope for new employment that can offset the massive losses in the automotive industry. All eyes are on Congress to see if they will follow through on the initial down payment in their next major transportation spending bill.

Jobs are being lost every month even two years after the recession began. While the number has stopped growing very fast, the number of jobs lost is growing every month without fail. These businesses cannot just wait for banks to start lending, and pretty soon we are going to be out of money to print.  We were losing more than 600,000 jobs every month just a few weeks back. This recovery will take much longer than in the Asia and Latam markets. The unemployment rate is still above 10% even after November showed up a huge improvement to just 11000 lost jobs ( just Kentucky lost 5000 out of this!) 15.4 million are still looking for work hopelessly stuck with a lasting unemployment with even the limited foreign worker visas going unrequited in this situation. The long term unemployed, looking for work for more than 6 months are a good 38.3% of the unemployed, another record for America.

More foreclosures

Thousands Of New York Area Home Owners Attend Mortgage Modification Event

Even as dismal numbers from the loan modification program caused an extension of the program till October 2010 ( see Geithner extends TARP) the latest shadow inventory nos ( detailing foreclosures shocked the nation with 1.7 million available for sale from foreclosures. St Louis got an award for 800 modifications to save homes from foreclosure! There seems to be no comparison between the two figures, and more is required than depending on just road construction to make new jobs

Probably some of the economists at Obama and Biden’s offices are already at work untangling the confusion of the stimulus and getting ready to tell us what has worked. I think it’s time.

Citi fizzles out in end 2009 bid

Repayment week came a cropper as Citibank found a lukewarm market waiting for its sale to raise the $20 billion to repay. It seems Vikram Pandit’s team failed to do the required homework before declaring its ambitious calendar and lacked the skills to judge the market conditions right for its sale. All the meetings Vikram Pandit had been having with the Treasury came a cropper on a day that mysteriously coincided with Obama’s call to the bankers.

The market does nt ignore such folly. All insider trading and information based decisioning apart, the market first and foremost reads market information and that information now puts Citi and AIG in the same league. Both will now be assessed with a lack of direction and difficulty in reading its stakeholders because of a simple public fracas. I mince no words when I say that they could now be treated worse than an Accenture cuddling Tiger woods a week after the man destroyed his marriage.

This is a setback for the entire recovery mechanism and a symptom of the misreading that afflicts the Geithers, Benmoshes and the Pandits

Even a Hongkong market could raise over $50 billion but you came out with an offer no one wanted for Citi. Sounds like, Citi is no better than one of the 133 banks that have failed in the US this year. This cannot be compared to the Mortgage meltdown or made a part of it. It needs a new chapter by itself. We all suffer for such fools though the gimmer of hope is that now no one cares when an AIG or Citi breaks the buck and the markets go on with better picks. It’s a shop like any other..In fact in pstate Des Moines in Iowa, the schools and the lake planes are all fine. The Ski resorts are doing big business too. And Dubai is back. Azerbaijan has a sovereign wealth fund. What about the new oil and mineral deposits south of Brazil and in the dense African safari..

Tortoise wins race for best U.S. city for business – MarketWatch

It’s no fluke in the pan either. Spokane (WA), Phoenix (AZ) and Boise(ID) have been consistent scorers, because you can get the same quality of life for much less than a crushing load on your pockets. And your favorite banks and ATMs have not been taken down either. Your favourite super retailers are there right till Nordstrom, I’d say do it now. Figure out where you want to live in that new pay cap, and your office will do it for you. Come to Iowa, Come to Nebraska. Come in your own plane. That is why your bonus is in the best stock you could own, your employer. Try it!

We all know the fable of the tortoise ultimately winning his painstakingly measured race against the hare.

Apply that to today’s economy and it’s relatively easy to come up with a winner for MarketWatch’s third survey of the best U.S. cities for business. This year’s victor is the subdued terrapin of regional economies: Des Moines, Iowa — population 556,230.

via Tortoise wins race for best U.S. city for business – MarketWatch.

Financial Bailout Extended Until Next October : NPR

Treasury Secretary Timothy Geithner announced Wednesday that the administration will extend the government's financial bailout program until next fall.

In a letter to House and Senate leaders, Geithner said the extension is “necessary to assist American families and stabilize financial markets.”

Money from the $700 billion taxpayer-funded bailout program has helped rescue big Wall Street firms, auto companies and others. That's angered many Americans, who feel the government hasn’t provided them with relief from high unemployment and rising home foreclosures.

Geithner said the Troubled Asset Relief Program that Congress passed in October 2008, will be extended until Oct. 3, 2010. He has the authority to extend the TARP simply by notifying lawmakers.

“The recovery of our financial system remains incomplete,” Geithner told lawmakers. “And, near-term shocks to that system could undermine the economic recovery we have seen to do.”

The Treasury secretary said new commitments bankrolled by the bailout fund will be limited to three areas next year.

One focus is stepping up efforts to curb record-high home foreclosures, a move necessary to stabilize the housing market and support a lasting economic recovery.

Another will be providing capital to small banks, which play a crucial role in providing credit to small businesses – normally a leading engine of job creation. But small banks have been weighed down by problem commercial real estate loans, which has made them reluctant to lend and hurt the ability of small businesses to expand and hire.

In a third area, Geithner said the government may boost its commitment to a program aimed at sparking lending to consumers and small businesses. Run by Treasury and the Federal Reserve, the Term Asset-Backed Securities Loan Facility, or TALF, started in March.

Geithner said he didn’t expect any new commitments to the TALF would result in additional costs to taxpayers.

via Financial Bailout Extended Until Next October : NPR.

zyakaira notes: Unfortunately with the press taking different sides, the timeline of the crisis and the stimulus  and even things such as the healthcare bill are very difficult to make out  sometimes. Such crisp notices keep america alive and NPR should get kudos, visitors and continuous financing for the enabling work they do in processing insight and accuracy too. i have also recently become a fan of ‘Wait, Wait .. don’t tell me’ which takes up matters after my own heart for the American people and in a fun way too in front of live audience. Radio is and must go on.

America liked Clunkers’ speed,

Caulkers are Green?

If you hated Obama administrations climate Change plan, America’s denizens could soon put you in a minority. Because Obama has found a way to spend the extra cash he saved from TARP ( see O’nomics:wow-it-might-add-up-advantage-zyaada/)  I have been unable to catch this anywhere else except our Time Warner scoop-a-thon CNN Money yet, but it is a valid program after the unprecedented success of Cash for Clunkers that kept erstwhile and current homeowners busy in August, September and October

President Obama proposed a new program Tuesday that would reimburse homeowners for energy-efficient appliances and insulation, part of a broader plan to stimulate the economy.

The administration didn’t provide immediate details, but said it would work with Congress on crafting legislation. Steve Nadel, director at the American Council for an Energy-Efficient Economy, who’s helping write the bill, said a homeowner could receive up to $12,000 in rebates.

The proposal is part of the President’s larger spending plan, which also includes money for small businesses, renewable energy manufacturing, and infrastructure.

We know energy efficiency “creates jobs, saves money for families, and reduces the pollution that threatens our environment,” Obama said. “With additional resources, in areas like advanced manufacturing of wind turbines and solar panels, for instance, we can help turn good ideas into good private-sector jobs.”

The program contains two parts: money for homeowners for efficiency projects, and money for companies in the renewable energy and efficiency space.

The plan will likely create a new program where private contractors conduct home energy audits, buy the necessary gear and install it, according to a staffer on the Senate Energy Committee and Nadel at the American Council for an Energy-Efficient Economy.

Big-ticket items like air conditioners, heating systems, washing machines, refrigerators, windows and insulation would likely be covered, Nadel said.

Consumers might be eligible for a 50% rebate on both the price of the equipment and the installation, up to $12,000, said Nadel. So far, there is no income restriction on who is eligible. That would mean a household could spend as much as $24,000 on upgrades and get half back.

via Cash for Caulkers could mean $12K per home – Dec. 8, 2009.

Things are looking up too! Bernanke is. | O’nomics

Watch our related post on how we have the snowmobile working to clear the c’congested’ road out to work..(TARP)

Well, all we needed to get on the road was pleasant musical carols singing we have cut down the debt..people almost rose to the occassion, refusing to pull out credit cards, but consumer credit overall is up with spending on cars and other personal loans..mortgages haven’t really taken off yet only the superbargain homes being bought up at less than $100k from foreclosures..Out here in the emerging markets, you can’t get easy credit for more than one home per family too and that might still be something to do for Bernanke ( if he makes it!)

October consumer credit outstanding fell at a 1.69 percent annual rate to $2.48 trillion. September’s figures were revised to show a $8.77 billion drop, previously reported as a $14.8 billion fall.

Analysts polled by Reuters had forecast consumer credit dropping by $9.5 billion in October. Consumer credit has now declined for nine straight months.

Confronted with the worst labor market in 26 years, consumers have been reluctant to spend, raising doubts that the fragile economic recovery might falter once the stimulus from government spending runs out.

“Households are still in the process of deleveraging. They are increasing spending, but its coming out of the savings they have accumulated during the recession,” said Bernard Baumohl, chief global economist at The Economic Outlook Group in Princeton, New Jersey.

“They are not acquiring new debt. We need to have consumers ramp up their spending if this economy is to continue to grow through 2010.”

Nonrevolving credit, which includes closed-end loans for big-ticket items such as cars, boats, college education and holidays, rose $3.44 billion, or at a 2.59 percent annual rate, to $1.59 trillion.

via U.S. consumer credit decline slows in Oct | Reuters.

Wow, It might add up! | Advantage zyaada

This is the jumpropes that you need to give the economy a kicker. But still, there is no snowplough :) And there is still that windscreen covered in snow, you broke the snow-brush too. But seriously, it need not all be that bad..$200 billion accounted for as saved from the TARP funds means a lot, a humongous amount. And this does not include the GM stock you will be able to sell soon. Some Citi stock as well..The other Sovereign funds made a lot of money. The US administration will too. Another $110 billion is said to be ok to be released for jobs in infrastructure reconstruction for which someone has found enough funds available. It just might add up..

People who found Friday’s report useful may not be driving with their head clearly. This is unlikely to bring in benefits before end 2011. What the heck! everyone takes a little time in passing funds from A to B and this one is the entire economy. A lot of retailers had a bad Thanksgiving despite every thing we said..on the other hand, Nordstrom did better..Amazon did great too But we”ll keep posting the data as it happens. I guess this will go the way healthcare did and people would be more jumpy than working to make it happen. Ouch! that hurts. O in the Oval Office not the one that retired in 2011, that O he still has negative approval ratings, Rasmussen reports didn’t swing too hard.

President Obama is expected to announce Tuesday that he wants Congress to redirect a certain portion of leftover Wall Street bailout funds toward job creation measures, White House officials told CNN.

That would come on the heels of news Monday that the White House was reducing the expected loss from the bailout by $200 billion. Potential job-creation ideas include building roads and bridges, “weatherizing” homes to reduce energy bills and lending to small businesses.

via Obama: Use TARP for job creation – Dec. 7, 2009.

In related news, Japan’s PM Hatoyama and his Democrats may run out of ‘charisma‘, and the ‘chamatkar’ [wonder, magic, sorcery, origin hindi] required to come back to power as it tries a stimulus refill in a long despaired Japan..

Japan’s government agreed on a $81 billion stimulus package on Tuesday, aimed at preventing the economy from tipping back into recession as deflation persists and a strong yen threatens exports.

JAPAN |  ECONOMY

Economists said the 7.2 trillion yen plan, equal to about 1.5 percent of gross domestic product, would not provide a significant lift to an economy dependent on overseas demand for machinery, electronics and cars.

While several other economies are already debating phasing out economic stimulus deployed to fight the financial crisis, Japan continues to struggle amid chronically weak consumer demand and falling prices.

The above news was also featured here on our favourite Livemint ( like a couple of pet WSJ writers featured earlier)