Actual finance blog

September 11, 2008

Pulaski

Filed under: term — Tags: , , — Professor Besto @ 10:21 am

Two months ago, Missouri Banking Commissioner Eric McClure wouldn’t have given a second thought to seeing preferred stock in Fannie Mae and Freddie Mac in a bank’s investment portfolio.

Then over the weekend, the federal government placed the two mortgage giants in conservatorship, yanking them from the private sector to government control. Dividends on the already battered preferred shares were suspended, and they lost much of their remaining value this week.

"It’s changed totally now," McClure said. Shares once seen as investment grade have suddenly become junk.

However, McClure said none of the 300 Missouri banks regulated by the state is in jeopardy because of their investments in Freddie and Fannie.

"In no case is a bank going to fail because of that," McClure said. State-chartered banks in Missouri have capital ratios averaging 9 percent, well above the 6 percent of total assets the state requires, he said.

Jorge Solis, director of Illinois’ banking division, said a review of investments by the 480 state-chartered banks in Illinois shows that those that held preferred shares in Fannie and Freddie have enough capital to continue operating safely.

Creve Coeur-based Pulaski Bank was among those dumping the stocks this week. The bank’s parent, Pulaski Financial Corp., Wednesday issued a statement saying that it had sold its 350,000 preferred shares in Fannie, taking a loss of $5.2 million. The company expects to take a charge of 51 cents a share against earnings for its fourth quarter, which ends Sept. 30.

Missouri doesn’t regulate Pulaski, which is a federally chartered savings association.

Ramsey Hamadi, Pulaski’s chief financial officer, said that as recently as July, Fannie Mae preferred shares still were considered solid investments, though their value had declined. The bank noted in a filing that month that its $8.9 million investment in the shares had declined in value to $8 million.

"Now it is a speculative investment," which isn’t suitable for the bank’s portfolio, Hamadi said fast cash online. "We are disappointed. It certainly is not something that you could have forecasted to occur and not as quickly."

Pulaski’s capital is still well above the 6 percent of assets required by regulators to be considered well-capitalized, Hamadi said. It’s core capital stood at 8.29 percent before selling the shares. The sale would take the ratio to 7.93 percent.

Kansas City-based Commerce, the largest Missouri-based bank,; Enterprise Bank & Trust Co. and Centrue Financial Corp., both of Clayton; and First Banks Inc. of Creve Coeur did not hold the shares, they said. None of the other locally based banks has given notice that it has the shares or plans to sell them.

U.S. Bank, the market share leader here, has $97 million in preferred stock of government-sponsored entities, said Lisa Clark, a spokeswoman. The bank considers the amount "very manageable," at less than one percent of its capital, she said.

Frank Sanfilippo, chief financial officer at Enterprise, said the government takeover of Fannie and Freddie has sent a shock wave through the industry. About 8,000 banks held the shares, regulators have said.

A bank that holds the shares has two choices, Sanfilippo said. It can either sell them and take the loss against earnings directly, as Pulaski did. Or it can hold them and write their value down to the current market price. Either way, bank earnings can take a hit.

A loss can affect the bank’s total equity capital, and in some cases, it can change the bank’s rating from "well-capitalized" to "adequately capitalized." Dropping to "adequate" can have a number of effects on a bank’s finances.

For one thing, the rates the Federal Deposit Insurance Corporation charges to insure the bank’s deposits will go up. Insurance rates already were going up because of bank failures that put a strain on the FDIC’s reserves.

Lower capital ratios also could cut off a bank’s access to the wholesale deposit market, Sanfilippo said. Some banks have turned to so-called

September 10, 2008

Coca-Cola bid for Huiyuan to test China antitrust law

Filed under: term — Tags: , — Professor Besto @ 10:33 am

Coca-Cola Co (KO.N: Quote, Profile, Research, Stock Buzz) plans to seek approval under China’s antitrust law for its $2.5 billion bid for top domestic juice maker Huiyuan, the final obstacle to what would be the largest foreign takeover of a local firm.

Analysts and lawyers said the application will be closely watched as it is the first case to test the nascent law.

Fears that the deal — which critics warn would mark the loss of a local champion to foreign control — could be derailed under the anti-monopoly regulations, have helped push down Huiyuan Juice Group’s (1886.HK: Quote, Profile, Research, Stock Buzz) shares 13 percent from its year high on Sept 3, struck after the purchase was announced.

“This will be the very first case under China’s antitrust law, implemented on August 1,” Huiyuan’s Chief Financial Officer Francis Ng told a news conference on Wednesday cashadvance.com.

“The offer price had been carefully considered by both the buyer and the sellers,” said Ng, when asked whether he thought the offer price was fair.

Coca-Cola’s Hong-based spokesman Kenth Kaerhoeg said: “We will obviously comply with the process, and we’ll facilitate it based on what the regulators ask of us.”

“It would be inappropriate to comment on the regulatory process,” he added.

The European Union Chamber of Commerce in China said on Tuesday rising economic nationalism was deterring investment by European companies and hampering access to the domestic market, saying the Huiyuan deal would be a litmus test of Beijing’s attitude toward foreign business. 

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August 19, 2008

Housing Starts in U.S. Probably Dropped to 17-Year Low in July

Filed under: term — Tags: , , — Professor Besto @ 5:15 am

U.S. builders probably broke ground in July on the fewest houses in 17 years, signaling the residential-construction slump will continue to hurt growth, economists said before a government report today.

Housing starts plunged 9.9 percent to an annual rate of 960,000 after a 1.066 million pace the prior month, according to the median forecast of 77 economists in a Bloomberg News survey. A separate report may show wholesale prices probably rose at a slower pace in July as fuel expenses peaked.

Stricter lending rules, rising borrowing costs, falling property values and record foreclosures will further depress home sales and cause builders to keep retrenching. Inflation pressures are likely to ease as the downturn in housing, loss of jobs and credit crisis weaken the economy this year and into 2009.

“The supply of housing continues to be cut in response to the still relatively high inventories of unsold homes,'' said Brian Bethune, an economist at Global Insight Inc. in Lexington, Massachusetts. “This will continue to generate a large negative drag on overall growth in the second half of 2008.''

The Commerce Department will release starts figures at 8:30 a.m. in Washington. Estimates in the Bloomberg survey ranged from 875,000 to 1.09 million.

Also at 8:30 a.m., the Labor Department may report the producer price index climbed 0.6 percent in July after jumping 1.8 percent in June, according to the survey median. Prices excluding food and fuel probably rose 0.2 percent for a third month.

Permits May Drop

Commerce's housing figures may also show building permits, a sign of future construction, fell 15 percent to a 970,000 annual pace, economists forecast online payday loan.

A change in New York City's building code that took effect July 1 caused housing starts and permits to unexpectedly surge in June as builders hurried to break ground ahead of the new regulations. The magnitude of the July drop may reflect, in part, a payback.

Underneath the gyrations, demand is weakening. Sales of existing homes fell to a 10-year low in the second quarter, according to the National Association of Realtors. A third of all sales were foreclosures or “short sales,'' in which lenders take a loss on a property.

Financing has also become scarce, a quarterly survey of banks by the Federal Reserve showed. Three-fourths of the loan officers polled reported they tightened standards on prime mortgage loans, up from the April survey. Lending rules on non- traditional loans were also toughened.

Mounting Losses

The five largest U.S. homebuilders reported a combined $1.08 billion in losses in their most recent quarters.

Builders are pessimistic as losses mount. The National Association of Home Builders/Wells Fargo's sentiment index yesterday showed optimism held at a record low in August for a second month.

Still, construction companies are making some headway in reducing the supply glut. The number of new homes for sale dropped in June by the most in four decades.

Some housing-related firms are faring better. Lowe's Cos., the world's second-largest home-improvement retailer, yesterday said full-year profit may fall less than it had anticipated.

Source

August 7, 2008

JPMorgan: Fed

Filed under: term — Tags: , , — Professor Besto @ 11:30 pm

The Federal Reserve’s proposed rules for credit card lenders could lead the banking industry to lose at least $10.6 billion in interest annually, JPMorgan Chase & Co. said in a letter to regulators, citing a study.

In May, the Federal Reserve and other regulators proposed steps to end what they called "unfair and deceptive" practices in the credit card industry. The rules aim to protect people from having their interest rates raised arbitrarily, among other practices.

In a letter sent Monday to the Fed’s board of governors, the Office of Thrift Supervision and National Credit Union Administration, JPMorgan’s Chase Bank subsidiary said the proposed regulation, if finalized, "is likely to have profound effects on Chase’s operations and financial results."

The bank also said the proposal will negatively affect the credit card asset-backed securities market by reducing the amount of secondary market capital, and make credit less available to customers.

Chase cited data collected from a group of banks, including Chase itself, on a confidential basis by the law firm Morrison & Foerster LLP. Morrison & Foerster could not comment on the data Tuesday, or on how many banks participated.

The cumulative impact for the participating banks would be at least $10.6 billion in lost annualized interest, Chase said in its letter, signed by Associate General Counsel Andrew T. Semmelman.

The bank said those industry losses would likely result in a nearly 12% increase in annual percentage rates to an average of 16.58%; a $1.1 trillion reduction in total credit lines to consumers; and tighter standards that would stop $11 billion in new accounts from being booked each year.

In addition to restricting rate hikes on cards in certain situations, the Fed’s proposed rules aim to limit the imposition of inadequate time restraints on consumers, and the practice of allocating all payments to balances with lower interest rates when a borrower has balances with different rates.

On Monday, the chairman of the Senate’s investigations subcommittee said he supports the Federal Reserve’s proposed restrictions on credit card practices - but that he believes there should be more.

Sen cash advance. Carl Levin, D-Mich., wrote in a 13-page letter to the Fed that it should expand its rules to end or restrict such practices as charging interest for debt paid on time; interest on transaction fees; fees levied on consumers paying their bills on time; and billing amounts that force consumers to pay four or five times their original debt.

Back in March, JPMorgan Chase (JPM, Fortune 500), at the behest of the U.S. government, bought the ailing investment bank Bear Stearns Cos. when it appeared to be near collapse. 

Source

June 19, 2008

Best Buy profit falls 7%

Filed under: term — Tags: , — Professor Besto @ 5:56 am

Best Buy reported a 7% drop in first-quarter profits Tuesday, but it still beat Wall Street’s expectations because of a lower share count and increased sales.

The electronics retailer said net income dipped to $179 million, or 43 cents per share, from $192 million, or 39 cents per share. The per-share figure is based on fewer shares outstanding.

Thomson Financial said analysts expected profit of 37 cents per share.

Best Buy Co. Inc (BBY, Fortune 500). said revenue jumped 13% to $8.99 billion from $7.93 billion. Analysts expected $8.57 billion.

Sales rose 3.7% at stores open at least 14 months. So-called comparable store sales are a key measure of a retailer’s health. The company said the gain "accelerated in the second half of the quarter and remains solid thus far in early fiscal June." The gain was driven by customers who bought higher-priced items such as flat-panel TVs, video gaming consoles, notebook computers and GPS devices.

"We believe company-specific drivers, including rolling out Best Buy Mobile’s store-within-a-store and Apple store-within-a-store are enabling (Best Buy) to take share from competitors," Deutsche Bank-North America analyst Mike Baker wrote in a note to investors.

The company expects adjusted profit of $3.25 to $3.40 per share and revenue of $43 billion to $44 billion in fiscal 2009 payday loan. Analysts had been predicting profits of $3.26 per share and revenue of $43.90 billion. The company expects comparable store sales for the year to grow 1% to 3%.

Richfield-based Best Buy lowered its new store plans for China for the year. It now plans to open eight to 16 Five Star stores and one to three Best Buy stores. Previously it had planned 20 to 25 Five Star openings and five to eight Best Buy openings.

"While we are working through the timing of our store openings, our commitment to China as a growth market is unwavering," said Bob Willett, CEO for Best Buy International and chief information officer.

Best Buy shares rose 37 cents to $46.25 at the open of trade Tuesday. 

Source

June 13, 2008

FedEx faces airline lawsuit

Filed under: marketing, term — Tags: , , — Professor Besto @ 10:08 pm

ATA Airlines is suing FedEx Corp. over its decision to drop the airline from its military charter team, a move ATA says forced it into bankruptcy protection and left it financially destroyed.

ATA says in a lawsuit filed Wednesday in federal court that FedEx (FDX, Fortune 500) broke contractual promises with the Indianapolis-based airline when it ousted ATA in January bad credit payday loans.

The airline says charter flights of military personnel and their families generated more than $400 million in annual revenue and were ATA’s most important profit base.

ATA abruptly ceased operations April 3. 

Source

May 22, 2008

Staples ekes out slim profit

Filed under: management, term — Tags: , , — Professor Besto @ 9:21 pm

Staples Inc. posted a slim 1.5% increase in its first-quarter profit, after posting small declines the previous two quarters amid slow retail sales of office products.

The world’s largest office products supplier said Tuesday its profit rose to $212.3 million, or 30 cents per share, in the three months ended May 3. That compares with a profit of $209.1 million, or 29 cents per share, a year earlier.

The latest profit matches analysts expectations.

Staples (SPLS, Fortune 500) says sales rose 6% to $4.9 billion from $4.59 billion a year ago, slightly beating analysts’ forecast of $4.83 billion.

Staples reaffirms its profit and sales forecast for the full year fast cash now. It expects a weak economic climate throughout 2008. 

Source

May 15, 2008

Whole Foods profit hurt by acquisition

Filed under: marketing, term — Tags: , , — Professor Besto @ 7:38 pm

Whole Foods Market Inc. said Tuesday that sales surged in the second quarter, but absorbing the Wild Oats chain it bought last year caused profit to sag by 13%.

The retailer of organic and natural foods said net income in the quarter ended April 13 fell to $40 million, or 29 cents per share, from $46 million, or 32 cents per share, a year earlier.

The Austin-based grocer said the acquisition of Wild Oats Markets Inc. cost $8.6 million, or 6 cents per share.

Analysts surveyed by Thomson Financial had predicted a profit of 30 cents per share.

Revenue rose 28% to $1.87 billion from $1.46 billion a year ago, but fell short of analysts’ forecast of $1.89 billion.

Sales at stores open at least a year, a key measure of retailing strength, rose 6.7% but slowed to 5.7% in the first four weeks of the new quarter, which the company blamed on changes in a couple of store locations.

Before the report was issued, Whole Foods (WFMI, Fortune 500) shares fell 11 cents to close at $33.64. In after-hours trading, they dropped $2.84, or 8.4%, to $30.80.

While still growing, Whole Foods in recent years has seen a slowing of its pace, from double-digit gains to quarters like the one just ended, as heavy spending on new stores has weighed on results.

Chairman and Chief Executive John Mackey said the recent quarter was a strong one at the chain’s core stores, and the company will press ahead with its long-term growth plans.

Through the first six months of its fiscal year, the company earned $79.1 million, or 56 cents per share, compared with $99.74 million, or 70 cents per share, a year earlier cash advance loan. Sales gained 29.7% to $4.32 billion from $3.33 billion, and same-store sales increased 8.2%.

The company has changed 27 of the Wild Oats stores over to Whole Foods, and it said sales growth doubled at those locations. It is closing others.

Whole Foods operates about 270 stores and has 89 in development, which are much larger on average than its existing ones. 

Source

May 7, 2008

GM Chevrolet plant workers strike

Filed under: term — Tags: , , — Professor Besto @ 10:22 pm

Members of a United Auto Workers union local went on strike Monday at General Motors’ Fairfax facility — hitting the plant that makes GM’s popular Malibu sedan.

During talks over the weekend, UAW Local 31 set a Monday morning strike deadline because union negotiators believed the two sides remained far from an agreement. The Fairfax plant employs more than 2,500 UAW members.

The plant makes the Chevrolet Malibu, a medium-sized sedan that was named "Car of the Year" at this year’s North American International Auto Show in Detroit.

The strike hits a key GM (GM, Fortune 500) product at a time when the company can ill afford it cash til payday loan.

Last week GM announced that it lost $3.3 billion in the first quarter, due largely to one-time charges and North American losses that offset gains in the rest of the world. 

Source

April 6, 2008

GASOLINE: Prices surge to record

Filed under: term — Tags: , , — Professor Besto @ 8:31 pm

Retail gas prices surged to a record above $3.30 a gallon Friday.

At the pump, gas prices rose 1.4 cents overnight to a national average of $3.303 a gallon, according to AAA and the Oil Price Information Service. That’s the latest in a series of records, and about 60 cents higher than a year ago.

In St. Louis, the average price on Friday was $3.231 a gallon, up 4.7 cents from Thursday.

In the Metro East area, the average was $3.443 a gallon, up 3.1 cents cash advance usa.

Gasoline in Missouri generally is lower priced due to taxes.



FROM STAFF AND WIRE REPORTS; JEREMIAH MCWILLIAMS AND RIDDHI TRIVEDI-ST.CLAIR CONTRIBUTED

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