Actual finance blog

SWBC’s LendingXpress subsidiary has teamed up with Equity National to offer home valuation and analytic products to lenders to process real estate loans.

LendingXpress focuses on helping financial institutions order all of the products necessary to close a real estate loan, including property valuations and lien position. Equity National is a East Providence, R.I.-based company that provides lenders with a full range of valuation services to process mortgages.

“There are a lot of appraisal management companies fighting for business today, and after exhaustive due diligence, we chose Equity National to be our strategic partner based on their focus on the customer, (Home Valuation Code of Conduct) orientation, and their management team, which is unmatched in the industry,” says Ted Robinson, senior vice president and general manager of LendingXpress.

San Antonio-based SWBC is a financial services company that provides insurance, mortgage and investment services to financial institutions, businesses and individuals nationwide.

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Stocks rose Thursday, led by technology shares, as investors looked past the day’s ho-hum economic news and geared up for Intel’s quarterly report, released shortly after the bell.

The Dow Jones industrial average (INDU) added 30 points, or 0.3%. The S&P 500 index (SPX) added 3 points, or 0.2%. Both closed at the highest point since Oct. 1, 2008. The Nasdaq composite (COMP) rose 9 points, or 0.4%, ending at the highest point since Sept. 3, 2008.

After the close, Dow component Intel (INTC, Fortune 500) said it earned 40 cents per share in the fourth quarter on sales of $10.6 billion. Both earnings and sales trounced estimates and marked a sharp improvement from the previous year. The stock gained 2% in extended-hours trading.

Overall S&P 500 earnings are expected to have risen more than 200% from the previous year, the worst quarter in Thomson’s history. JPMorgan Chase (JPM, Fortune 500) is due to report results Friday morning.

The financial behemoth is expected to have earned 66 cents per share on revenue of $27 billion.

Stocks ended higher Wednesday, with the Dow closing at a 15-month high, as investors looked past Google’s potential shutdown of its China operations and mea culpas from the nation’s major bank executives. After a weak start Thursday, stocks turned higher, despite the day’s mixed economic news.

The major indexes posted sizable gains last year as investors dove back in after moving beyond the worst financial crisis in decades. But any gains this year are likely to be more subdued.

"The next few months is going to be about merging expectations and reality," said Jack Ablin, chief investment officer at Harris Private Bank.

"Expectations have been set pretty high for earnings and the economy, in terms of where stock valuations are set," he said. "Now we need to see if the results can deliver."

Economy: Retail sales fell 0.3% in December, the government reported Thursday. The report was a surprise to economists who were expecting sales to have risen 0.5%, according to a consensus of economists surveyed by Briefing.com. Sales rose a revised 1.8% in November.

Retail sales excluding autos fell 0.2% in December after rising 1.9% in the previous month. Economists thought they would rise 0.3%.

Helping to soften the blow, the National Retail Federation said holiday sales for the November-December period rose 1.1%, a better showing than the retail group’s forecast of a 1% decline low interest rate personal loans.

The number of Americans filing new claims for unemployment rose last week to 444,000 from 433,000 in the previous week. Economists thought claims would rise to 437,000.

Continuing claims, a measure of Americans who have been receiving benefits for a week or more, fell to 4.596 million from 4.807 million in the previous week. Economists thought claims would fall to 4.750 million.

November business inventories rose 0.4% after rising 0.4% in the previous month. Economists thought claims the increase would be 0.3%.

Banks: A congressionally appointed panel investigating the lead-up to the financial crisis was holding a second day of hearings, with government officials including Attorney General Eric Holder testifying.

On Wednesday, CEOs of the largest financial institutions testified that while the banks took on too much risk and made mistakes, they were not aware at the time that a financial crisis of such a magnitude could develop.

In other news, President Obama proposed a plan Thursday to tax companies that took bailout funds, legislation he says is necessary to make sure the banks return the money they accepted in full.

Results: Intel shares gained ahead of its results. Merck (MRK, Fortune 500), Microsoft (MSFT, Fortune 500), IBM (IBM, Fortune 500) and Hewlett-Packard (HPQ, Fortune 500) were the Dow’s other big gainers.

Market breadth was positive. On the New York Stock Exchange, winners beat losers by four to three on volume of 890 million shares. On the Nasdaq, advancers topped decliners five to four on volume of 2.3 billion shares.

World markets: Asian and European markets mostly ended higher.

Commodities and the dollar: The dollar fell against the euro and gained versus the yen.

COMEX gold for February delivery rose $6.20 to settle at $1,143 an ounce. Gold closed at an all-time high of $1,218.30 an ounce last month.

U.S. light crude oil for February delivery fell 26 cents to settle at $79.39 a barrel on the New York Mercantile Exchange.

Bonds: Treasury prices rallied, lowering the yield on the 10-year note to 3.73% from 3.79% late Wednesday. Treasury prices and yields move in opposite directions.  

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Greek Prime Minister George Papandreou pledged “radical” action to bring the country’s budget deficit within European Union limits by 2013 as the two- month old government struggles to convince investors it can get to grips with public finances.

“In the next three months we will take those decisions which weren’t taken for decades,” he said in a speech in Athens today, attended by union and employer-group representatives, and politicians. Papandreou, who came to power in October, said many choices will be “painful,” though he pledged to protect poorer and middle-income Greeks.

Papandreou is trying to shore up confidence in Greece after its bonds tumbled last week amid concern about its commitment to cutting the European Union’s largest budget deficit, set to reach almost 13 percent of economic output this year. Fitch Rating cut Greece one step to BBB+ and the yield on the Greek 10-year government bond has risen more than a percentage point to 5.465 percent since Oct. 8.

“It does not appear that he has provided much insight into how he will reduce Greece’s heavy debt burden,” Brown Brothers analysts led by New York-based Marc Chandler wrote in a research note. “The most important take-away point is that key decisions will be made over the next three months and the pain will be distributed.”

European Central Bank Vice President Lucas Papademos on Dec. 12 said Greece’s fiscal situation is “extremely serious.”

Papandreou, who said he will forge a “new national” agreement, today pledged to cut the deficit, to under 7 percent from 2011 and begin reducing the debt, set to exceed 100 percent of gross domestic product this year, from 2012 Payday advance. That will be achieved through taming the deficit and selling more state asset beginning next year.

The premier said revenue to reduce debt would come from exploiting the state’s real estate holdings, a real estate investment fund, as well as securitization of income from the state’s tax on major property holdings.

Under pressure from the EU to move quickly, Papandreou said he would step up talks on an overhaul of the tax system, one of his election pledges. The new system will be in place in the first quarter of 2010, he said.

The audience applauded when Papandreou announced executives of banks under state control wouldn’t get any bonuses and those paid at private banks would carry a 90 percent tax rate.

The government will set up a new economic police department to stamp out contraband, tax evasion and corruption, a key plank in the Socialists’s agenda to boost revenue.

“Today our biggest deficit is that of credibility,” Papandreou said. “In the last years Greece lost all traces of credibility, which is why international institutions, partners want to see actions.”

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Baidu’s hasty move to a new Internet ad system marks a rare stumble for China’s dominant search engine, opening a window of opportunity for others salivating for a piece of the country’s fast-growing online market.

Baidu, whose name is practically synonymous with Internet search in China, surprised investors when it revealed transition to its new Phoenix Nest system will lead to softer revenues into next year as customers adjust, sending its stock down sharply.

The news was music to others, such as Sina Corp and global search leader Google, looking for a bigger piece of the pie in the world’s biggest Internet market with 235 million search users in June, up about a third from a year ago.

“In the short term Baidu could possibly lose market share to Google,” said JP Morgan analyst Dick Wei.

“From the end user perspective, they aren’t going to see much of a difference, but from the advertisers perspective, if you look at monetization market share, it (Baidu’s market share) could be a bit lower in the next few months,” he said.

Baidu expects to lose some customers and have lower revenue in the near term after the system is fully rolled out.

Baidu shares, which shed 0.5 percent to close at $432.97 during regular trading hours in New York, fell more than 13 percent in after-hours trade to $375.99 after the company gave its revenue forecast that was well below Wall Street estimates.

The glitch isn’t the first for Baidu, which was previously accused by some of the world’s biggest music companies of allowing illegal trading of copyrighted songs over its system.

But the stumble could have more serious implications as it relates directly to the company’s revenue generation model.

ONLINE PLAYERS

Baidu, whose name comes from an ancient Chinese poem, is just one of a growing field of upstart firms seeking to cash in on China’s rapidly growing Internet, home to a search market valued at 1.8 billion yuan ($264 million) in the second quarter.

Online game companies such as Shanda Games and NetEase vie for dominance in the country’s Internet gaming market worth nearly $1 billion in the second quarter, while portal operators such as Sina and Sohu.com also spar for dominance in the portal space.

In an Internet market where two or three names usually control each space, Baidu stands out because of its single-handed dominance of China Internet search.

Several Chinese Internet firms such as NetEase, Perfect World and Baidu, have seen their share prices skyrocket this year. However, softer-than-expected fourth quarter guidance from two other companies may further dampen investor sentiment.

Sohu and its recently listed gaming unit Changyou.com warned on Monday that current-quarter revenue would come in below Wall Street estimates, sending their shares down. 

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Goldman Sachs Group Inc’s vaunted trading operations helped the dominant Wall Street firm quadruple its earnings, but investment banking results were lackluster and its shares fell.

Goldman, whose lavish compensation has drawn scrutiny, stayed on pace to hand out more than $20 billion in year-end bonuses. That would be equivalent to more than $630,000 per employee and could beat a record set for compensation in 2007.

But in a sign of weakness, Goldman’s investment banking and asset management revenues were lower. The bank fell to No. 2, behind Morgan Stanley, in merger and acquisition adviser rankings for deals announced globally through the third quarter, according to Thomson Reuters. It also dropped a spot to No. 7 in global capital markets.

“Goldman produced great numbers but apparently didn’t live up to those heightened expectations,” said Peter Jankovskis, co-chief investment officer at Oakbrook Investments.

“Their real earnings, the question is how repeatable are they,” he said. “Trading gains come and go. They’re genuine earnings at the time, but it’s not like something you rely on quarter to quarter.”

Fixed income, currency and commodities (FICC) trading nearly quadrupled, helping propel overall revenue to a forecast beating $12.37 billion.

Yet the $5.99 billion in FICC revenue, fueled by credit products and mortgages, also lagged the second quarter and fell short of some high expectations.

“While it is difficult to call $6 bln in FICC trading a miss, we suspect the recent run-up in GS shares reflected expectations for a stronger trading revenue number,” analyst Jeff Harte of Sandler O’Neill wrote in a research note.

The New York-based firm posted third-quarter net income for common shareholders of $3.03 billion, or $5.25 a share, up from $845 million, or $1.81 per share, a year earlier.

It easily beat analysts’ average forecast of $4.24 a share, according to Thomson Reuters I/B/E/S. But one analyst noted the beat was helped by Goldman’s decision to set aside less than usual for compensation.

‘HEIGHTENED EXPECTATIONS’

Goldman, which has been under fire from some quarters over gold-plated pay so soon after taking government bailout funds, allocated 43 percent of net revenue in the third quarter to compensation and benefits, down from 49 percent in the first half.

Stellar results by rival JPMorgan Chase & Co on Wednesday may have prompted investors to raise the bar for Goldman.

JPMorgan’s lift from fixed income — its trading revenues in that area rose more than five-fold to $5 billion — in particular led analysts and investors to expect a similar or larger jump at Goldman, which has a reputation as a more aggressive risk-taker than the commercial bank.

Goldman shares fell 2.0 percent to $188.45 in afternoon trading, underperforming the Amex Securities Broker dealer index .XBD, which was 1.2 percent lower. The shares are up nearly 124 percent this year. 

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CIT Group Inc is eyeing a loan of up to $7 billion if a planned debt exchange offer fails and the commercial lender has to file for pre-packaged bankruptcy, two sources familiar with the matter said on Thursday.

The board of the lender, which caters to small and mid-sized businesses, was meeting on Thursday to consider a restructuring plan, a third source familiar with the matter said.

Under the terms of a rescue loan CIT received in July, Thursday is the deadline for the company to come up with a restructuring plan agreeable to lenders.

CIT plans to offer its unsecured debt holders two options — either exchange their debt voluntarily or face a pre-packaged bankruptcy.

If the company goes through a pre-packaged bankruptcy, it would need a debtor-in-possession (DIP) loan to finance it during the process. The company is eyeing a DIP loan of $5 billion to $7 billion, the sources said. No such loan has yet been finalized, they said.

CIT declined to comment. The sources declined to be identified because talks are not public.

CIT shares closed down 15 cents, or 12.4 percent, at $1.06 on the New York Stock Exchange.

Its bonds were mixed. The 7.625 percent bond due 2012 was the most actively traded earlier in the day, rising 1.5 cents to 66 cents on the dollar, according to MarketAxess.

RESTRUCTURING PLAN

In a regulatory filing on Thursday, CIT said it intends to restructure outside court through an exchange offer, but may have to file for pre-packaged bankruptcy if it was unsuccessful.

If neither of those work, CIT will likely have to file for bankruptcy without an agreed on plan, which may lead to asset liquidations, it said in a U.S. Securities and Exchange Commission filing.

On Tuesday, sources told Reuters that the exchange offer is likely to essentially turn the company over to bondholders.

Debt investors would get some combination of new debt secured by assets and shares in the company. CIT’s overall debt levels would shrink.

CIT’s longer-term plan is to essentially turn itself into a bank. The company is one of scores of lenders and underwriters that relied on bond markets to fund their operations, only to suffer as the credit crunch has raged for two years.

In the filing, CIT said it expects to seek permission to transfer certain business platforms into its CIT Bank unit within 12 to 18 months after the completion of its restructuring. 

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Germany raised the pressure on General Motors on Friday to choose a buyer for its Opel unit, with Economy Minister Karl-Theodor zu Guttenberg telling the U.S. carmaker he expected a “fundamental decision” next week.

Speaking on ARD television, Guttenberg said there were offers for Opel which were ready to be signed and that it was time for the U.S. parent to “give in.”

Frustration with GM is mounting in the German government, which has come out strongly in favor Canadian auto parts group Magna’s bid for Opel.

Sources have told Reuters that some members of the GM board want to keep Opel instead and if that does not work would prefer to sell to Belgian-based financial investor RHJ International. Guttenberg said talks were focused on finding an investor solution for Opel, suggesting Berlin does not expect GM to keep the carmaker.

The government has said it would only provide billions of euros in aid to Opel if GM selects Magna. There are big questions about whether GM could come up with the funds it would need if it decided not to sell its European unit.

The head of GM Europe, Carl-Peter Forster, told Die Welt newspaper in comments released on Thursday that he believed Magna was most likely to win a bidding battle for Opel but that the carmaker could also thrive under the ownership of its U.S. parent.

“The greatest probability would be, for me, Magna, since all prerequisites are fulfilled, the contracts have been negotiated to their conclusion, and the financing is there,” he said in Friday’s edition of the German paper business cards.

GM sources said Forster, whom Magna has requested to stay on to run Opel should it win the deal, was not speaking for management.

The sources said a group of senior executives, including vice chairmen Bob Lutz and Tom Stephens favor either the RHJ bid or, increasingly, no sale at all.

Opel, which employs about 25,000 people in Germany, has been on the political agenda for months in Europe’s largest economy, which holds a federal election on September 27.

In an interview published on Friday, Chancellor Angela Merkel said she still expected Opel to be hived off from GM.

“We have no indication that GM is moving away from an investor-based solution,” Merkel told the Westdeutsche Allgemeine Zeitung daily.

Opel’s senior labor leader, Klaus Franz, on Thursday told General Motors that his workforce would not pitch in to reduce about $1.2 billion in costs if Detroit retained control of the European unit.

(Writing by Dave Graham, editing by Will Waterman)

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When the financial system was teetering, Federal Reserve Chairman Ben Bernanke flooded it with trillions of dollars to save the banks and free up credit for consumers and businesses.

Looming in the future is a high-risk challenge for the economy’s rescuer-in-chief: He will have to mop up that money without disrupting a nascent recovery.

And timing is vital. Act too fast, and Bernanke risks choking off lending to businesses and everyday Americans. Wait too long, and he risks setting off crippling inflation.

Assuming he manages to help usher in a sustained recovery, Bernanke, like his predecessors, will eventually face still another challenge: He will be under enormous political pressure to keep interest rates low, even though that could speed inflation.

But the Fed chief will face no task with quite the peril of withdrawing the trillions the Fed has pumped into the financial system in ways that had never been envisioned.

That money helped prop up shaky banks. It also was intended to unlock lending to people and companies, a key component of any recovery but one that so far has had only spotty success.

When to pull back the money is an issue sure to surface as Bernanke, his counterparts in other countries, academics and economists meet over the next couple of days at an annual Fed conference in Jackson Hole, Wyo.

Some analysts think it could take four or five years for the Fed to withdraw the money entirely and shrink a balance sheet that is now about $2 trillion, more than double what it was when the financial crisis struck free credit report without a credit card.

Already, the Fed has taken baby steps.

It has said it will allow one program intended to support money market mutual funds — one that hasn’t even been used — to expire Oct. 30. It’s also reduced the maximum it will lend to banks under two other programs.

But this week the Fed extended a separate program designed to increase lending and help the commercial real estate market. So far, about $40 billion in loans has been extended to investors — a small fraction of the $200 billion made available in the program’s first phase. And Americans still have trouble getting loans.

Congress, the White House and statehouses across America will probably exert intense pressure on the Fed to keep the money flowing and the emergency aid programs operating.

Keeping the easy money in place too long could feed high inflation by encouraging overborrowing and overspending. Surging inflation could then derail a recovery if the Fed aggressively boosts interest rates.

But pulling the plug too soon on the Fed’s emergency aid could set back a recovery even faster. If, for instance, the Fed dumped its mortgage securities and interest rates shot up, homeowners and the housing industry would take a further pounding.

To prevent inflation from surging, many economists also think the Fed will have to start raising its key bank lending rate next summer.

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Consumers, the cornerstone of U.S. economic activity, are still in disarray, data and central bank measures signaled on Monday, as households struggle amid the worst recession since the Great Depression.

The Federal Reserve announced the extension of programs to boost consumer lending, while credit-card issuers showed that people are increasingly having trouble paying their bills.

Manufacturing appears to be finding a floor, but without a pronounced recovery of consumer spending, any economic recovery is likely to be feeble, since consumers fuel about 70 percent of U.S. economic activity.

The Fed’s measures suggest that while the central bank’s emergency stopgaps for many parts of credit markets seem to be working, there is still much work to be done in revitalizing lending to consumers for everything from houses to cars, analysts said.

“It is rather like triage,” said Jay Mueller, senior portfolio manager with Wells Capital Management in Milwaukee. “Several of the markets that were in trouble are functioning much better. The Fed is putting resources where they are most needed,” he said.

In a joint announcement with the U.S. Treasury, the Fed said it would extend its Term Asset-Backed Securities Loan Facility to June 30, 2010 for newly issued commercial mortgage-backed securities.

The Fed and the Treasury also extended TALF through March 31 for newly issued asset-backed securities and already-issued, or “legacy,” commercial mortgage-backed securities. Both parts of the program were due to expire December 31.

In deciding to extend the TALF’s life, the Fed is trying to address the decline of commercial property markets, widely regarded as the next shoe to drop for many already debilitated smaller and medium-sized U payday loan.S. banks. “Everybody is concerned about commercial mortgage-backed securities,” said Mueller. Fed policy-makers “are still trying to get that market functioning,” he said.

After three years of sliding prices, housing activity, although stabilizing somewhat, remains depressed.

U.S. homebuilder sentiment in August rose to its highest level in over a year, a private survey showed on Monday. It added to mounting evidence that the housing market– and in turn, the economic recession — were leveling off.

The National Association of Home Builders/Wells Fargo Housing Market Index edged up to 18 from 17 in July, in line with market expectations.

But home improvement retailer Lowe’s Cos posted a 19 percent drop in quarterly profit on Monday and forecast current-quarter earnings below Wall Street estimates as consumers put off big home projects. It shares fell more than 8 percent.

ASSET FLOW WORRIES

Bond analysts also are concerned that over the long term, should foreign investors dump U.S. Treasuries, that could cause economy-wide borrowing costs, including mortgage rates, to soar, snuffing out any economic recovery.

The release of June U.S. asset flows data added to those anxieties. China, the biggest foreign holder of Treasuries, trimmed its overall holdings of U.S. government securities by $25 billion in the month, although analysts noted that one month’s decline was not enough to raise alarms, yet. 

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Citing weak demand for coal used to fuel power plants, Patriot Coal Corp. will shut a mine in southern West Virginia and eliminate 314 jobs.

Employees were notified that they’ll lose their jobs as of Oct. 5, Creve Coeur-based Patriot said in a statement.

The mine being closed produces about 2.5 million tons of coal a year. It is part of a complex that also includes an underground mine.

The recession and cooler weather across parts of the country have led to a decline in electricity demand. In response, coal producers have shut or idled mines and slashed budgets free business cards.

“Our strategy is to concentrate production at lower-cost mining complexes,” Patriot CEO Richard M. Whiting said in a statement. “By ceasing operations at this higher-cost surface mine, Patriot will keep valuable permitted reserves in the ground until the market yields more favorable pricing and margins.”

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