Day Trading & Forex Forum

theSheik

With the TARP pot coming in well under budget, US banks now surely look seriously undervalued

Amazed that everyone's not piling BIG TIME into CitiGroup at least...

Rhody Trader

Can you say "dilution"? For some banks it remains unclear as to whether there's going to be further capital raising and in what fashion.

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John Forman
Author - The Essentials of Trading

theSheik

enter stage left, Joe Public...

with LIBOR rates still under 1pc, even the banks are starting to lend to each other again

worst is over IMHO

all the bodies have been found exactly where they were expected to be

well, in the US anyway...

GammaJammer

Plus of course after the Goldies 'creative accounting - mind the gap' thing, any remaining vestiges of public trust in the banks to 'fess up and do the right thing is departed, not to return for a good long time.

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"That which doesn't kill me makes me stronger"

Martinghoul

I wouldn't bet on all the bodies having been found, personally. I am pretty sure there's a few turds hidden here and there. I know US banks are a lot better at making sure things get cleaned up, but all the negative results coming out of Europe (SocGen, Cmz and RBS) are not exactly filling me with confidence.

Moreover, I am pretty sure that the Q1 results at Citi, Goldman et al represent a one-off and it would be very difficult to produce similar performance going forward (unless Uncle Sam decides to pay some more juicy bid/offers).

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"Insofar as I may be heard by anything, which may or may not care what I say, I ask, if it matters, that you be forgiven for anything you may have done or failed to do which requires forgiveness."

theSheik

let's face it, those Q1 results were "better than expected"....

theSheik

Bloomberg

source Global Stocks Rally on Stress Test Results, Improvement in Jobs - Bloomberg.com



Global Stocks Rally on Stress Test Results, Improvement in Jobs

By Rita Nazareth

May 8 (Bloomberg) -- Stocks rallied around the world as Federal Reserve Chairman Ben S. Bernanke said a review of banks’ health “should provide considerable comfort” and a report showing fewer job losses than forecast signaled the worst of the recession is over.

Citigroup Inc. and Bank of America Corp. jumped at least 5.8 percent, while Fifth Third Bancorp rallied 36 percent. The government said U.S. banks need to raise only $74.6 billion in capital, which Bernanke said should reassure investors about the soundness of the financial system. Target Corp. and Exxon Mobil Corp. climbed as the government said employers cut 539,000 jobs in April, less than the average economist estimate of 600,000.

“It’s a good piece of economic data,” said Jeffrey Davis, who oversees $3.2 billion as chief investment officer at Lee Munder Capital Group in Boston. “Investors are starting to believe that the spiral down on the economy has stopped. It’s comforting to see that.”

The Standard & Poor’s 500 Index climbed 1.2 percent to 918.09 at 9:36 a.m. in New York, poised for its eighth weekly advance out of the past nine. The Dow Jones Industrial Average rallied 109.92 points, or 1.3 percent, to 8,519.77. Treasuries gained after the jobs report prompted traders to reverse bearish trades. Oil headed for its biggest weekly gain since March, while the dollar declined to a one-month low against the euro.

The MSCI World Index added 0.8 percent to 941.44, extending its weekly gain to 5.1 percent. The gauge of 23 developed countries has surged 37 percent since March 9 as earnings at companies from Credit Suisse Group AG to Ford Motor Co. beat estimates and optimism grew that the worst of the credit crisis has passed.

S&P 500’s 2009 Gain

The S&P 500 yesterday dropped from a four-month high before the stress-test results as financial, telephone and technology companies retreated. The measure, which has risen 36 percent from a 12-year low in March, this week erased its loss for 2009 as reports on home sales and manufacturing in China boosted confidence the global recession is easing.

Citigroup climbed 8.1 percent to $4.12 after the Fed said it needs $5.5 billion in additional capital. Bank of America, determined to require $33.9 billion, gained 5.8 percent to $14.30. Bank of America was also raised to “market perform” from “underperform” a Wachovia Corp., which cited reduced dilution concern following the stress tests.

Fifth Third Bancorp, Ohio’s largest lender, soared 36 percent to $7.27 as the central bank said it must raise $1.1 billion.

JPMorgan Chase & Co. climbed 4.2 percent to $36.73, while Goldman Sachs Group Inc. gained 1.1 percent to $135.18. The two banks passed stress tests without needing fresh capital.

Libor Drops

The cost of borrowing dollars among banks in London capped its biggest weekly drop since March following the stress tests. The London interbank offered rate, or Libor, that banks charge for three-month loans fell two basis points to 0.94 percent today, according to the British Bankers’ Association, completing an eighth week of declines, the longest run of decreases since February 2008. The Libor-OIS spread, a barometer of the unwillingness of banks to lend, fell today to the lowest level in more than nine months.

Analysts at UBS AG upgraded U.S. commercial bank stocks to “overweight” from “underweight” after the government’s review of the industry.

Exxon Mobil Corp., the world’s largest oil company, increased 1 percent to $69.62. Crude oil rose for a third day in New York, poised for the biggest weekly gain since March, on signs the economy may be starting to recover.

Another government report scheduled for 10 a.m. may show wholesale inventories in March dropped 1 percent, following a 1.5 percent decline in the prior month, according to a Bloomberg survey of economists.

Laggards

Genworth Financial Inc. declined 12 percent to $4.06. The life insurer and mortgage guarantor that failed to qualify for U.S. aid reported a fourth straight quarterly loss as the value of holdings backing insurance policies plummeted.

Morgan Stanley declined 6.8 percent to $25.30. The company, whose stock has gained 69 percent this year, sold new shares at $24 each to raise $3.5 billion, more than the $2 billion it planned, after regulators determined the company needs more capital.

Wells Fargo & Co. fell 2.4 percent to $24.17. The biggest U.S. mortgage originator must raise $13.7 billion after the government’s stress test found the bank had too little common equity to withstand a prolonged recession. The company said earlier it plans to sell $6 billion of common stock.

Celgene Corp. lost 3.5 percent to $40.34. The maker of cancer drug Revlimid was cut to “sell” from “neutral” at Goldman Sachs Group Inc., which cited concerns about health-care reform and the economy.

To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net.

Last Updated: May 8, 2009 09:41 EDT