Bancorp (NasdaqGS:FITB), a large U.S. regional bank, said on Wednesday it plans to raise at least $2 billion of capital and will slash its dividend by 66 percent to cope with mounting credit losses.
Shares of Fifth Third fell $1.78, or 14 percent, to $10.95 in pre-market trading.
The bank, the second-largest based in Ohio, joins a growing number of rivals to raise capital and slash their dividends this year, including National City Corp (NYSE:NCC - News) and KeyCorp (NYSE:KEY - News), the state's largest and third-largest banks.
Ohio has been among the states hardest hit by the nation's housing slump. Fifth Third is based in Cincinnati, while National City and KeyCorp are based in Cleveland.
Fifth Third said it expects to issue $1 billion of convertible preferred shares and raise at least $1 billion more by selling non-core businesses in the next several quarters.
It also said it will cut its quarterly dividend to 15 cents per share from 44 cents.
"We expect these actions to enable us to weather further depreciation in home prices as well as a significant weakening in economic activity," Chief Executive Kevin Kabat said in a statement. "Our bottom-line results won't meet our expectations. We are not satisfied."
The bank was not immediately available for further comment.
Fifth Third said the moves will help it boost its Tier-1 capital ratio, a measure of its ability to cover losses, to 8.5 percent, above the 6 percent that regulators say reflects a "well-capitalized" bank.
It said it expects net charge-offs to equal 1.6 percent to 1.65 percent of loans and leases in 2008, and a higher percentage in 2009. It expects to set aside $350 million to $375 million more in the second quarter than actual net charge-offs, and that its provisioning will also exceed charge-offs in 2009.
Fifth Third said it named Kabat chairman, replacing George Schaefer, who is retiring. Schaefer was also chief executive until April 2007.
The bank has $111 billion of assets and operates 1,314 branches in 12 U.S. states, mainly in the Midwest and Southeast.
Wednesday, June 18, 2008
Friday, June 13, 2008
Dividend Dive
Regional banks used to be treasured for their generous dividend yields, but with loan losses mounting, those days are over.
On Thursday, KeyCorp (nyse: KEY - news - people ) said it would cut its dividend in half, weeks after it warned that net write-offs could be twice as high as initially forecast. The news sent its shares down 23.7%, or $3.73, to close at $11.98. During Thursday's session, the stock dipped to an all-time low of $11.64.
KeyCorp blamed its need for capital on an adverse ruling related to a tax dispute resulting from a partnership between KeyCorp and another regional bank, PNC Financial Services Group (nyse: PNC - news - people ). The ruling slapped KeyCorp with an after-tax accounting charge to earnings and capital in the range of $1.1 billion to $1.2 billion.
"If it had not been for the adverse court ruling on our tax treatment of a leveraged lease transaction, we probably would not have considered the capital raising actions. But the ruling forced our hand and prompted the decision to build on our strength with a capital raise, one that we think not only is prudent in light of the economic climate, but also is an appropriate move as we look to the future of the enterprise," said Chairman Henry Meyer.
On Wednesday, KeyCorp's board approved offerings for newly issued shares and convertible preferred stock as a way to raise $1.5 billion in much-needed equity. The board also said it plans to cut its annual dividend in half to 75 cents a share, resulting in $200.0 million, annually.
That lowers its yield to 6.3% from its previous payout of 9.5%, based on Wednesday's closing price of $15.71.
The consensus among analysts is that regardless of litigation charges, halving a dividend after a long history of annual increases, reflects poor management--especially after announcing that write-offs will be significantly higher than expected.
"The decision to reduce our dividend after 43 consecutive years of annual increases was made after great deliberation," Meyer said. "It was a record we were extremely proud of, but we must recognize the current economic realities as we manage our business for the future."
Regional banks, which boasted some of the best dividend yields in 2007, according to the Mergent Dividend Achievers 50 Index, have been scrambling to raise capital by slashing dividends and other measures in order to cover loan losses (See: " Banking's Mean Season"). And as a result, dividend yields have suffered. Index component Provident Bankshares (nasdaq: PBKS - news - people ) slashed its dividend in April. Provident Bank's parent company unveiled a capital-bolstering plan on April 11 that included the issuance of $65.0 million in securities and a $50.0 million subordinated debt offering for a total of $115.0 million in new capital. The plan also included a dividend reduction to 44 cents a share, annually for yearly savings of $29.0 million.
National City (nyse: NCC - news - people ) has cut its dividend twice this year--most recently, to a quarterly dividend of 1 cent a share from 21 cents a share, for a paltry yield of 0.8%.
By comparison, regional banks with steady dividends like Comerica (nyse: CMA - news - people ) and Fifth Third Bancorp (nasdaq: FITB - news - people )--both of which ranked on last year's Index at fourth and seventh, respectively--still have strong dividend yields at 8.3% and 12.0%. However, with shares of Comerica down 26.7% and Fifth Third's stock down 41.5% since the beginning of the year, it's clear that investors are still concerned about massive write-offs and those dreaded dividend cuts.
On Thursday, KeyCorp (nyse: KEY - news - people ) said it would cut its dividend in half, weeks after it warned that net write-offs could be twice as high as initially forecast. The news sent its shares down 23.7%, or $3.73, to close at $11.98. During Thursday's session, the stock dipped to an all-time low of $11.64.
KeyCorp blamed its need for capital on an adverse ruling related to a tax dispute resulting from a partnership between KeyCorp and another regional bank, PNC Financial Services Group (nyse: PNC - news - people ). The ruling slapped KeyCorp with an after-tax accounting charge to earnings and capital in the range of $1.1 billion to $1.2 billion.
"If it had not been for the adverse court ruling on our tax treatment of a leveraged lease transaction, we probably would not have considered the capital raising actions. But the ruling forced our hand and prompted the decision to build on our strength with a capital raise, one that we think not only is prudent in light of the economic climate, but also is an appropriate move as we look to the future of the enterprise," said Chairman Henry Meyer.
On Wednesday, KeyCorp's board approved offerings for newly issued shares and convertible preferred stock as a way to raise $1.5 billion in much-needed equity. The board also said it plans to cut its annual dividend in half to 75 cents a share, resulting in $200.0 million, annually.
That lowers its yield to 6.3% from its previous payout of 9.5%, based on Wednesday's closing price of $15.71.
The consensus among analysts is that regardless of litigation charges, halving a dividend after a long history of annual increases, reflects poor management--especially after announcing that write-offs will be significantly higher than expected.
"The decision to reduce our dividend after 43 consecutive years of annual increases was made after great deliberation," Meyer said. "It was a record we were extremely proud of, but we must recognize the current economic realities as we manage our business for the future."
Regional banks, which boasted some of the best dividend yields in 2007, according to the Mergent Dividend Achievers 50 Index, have been scrambling to raise capital by slashing dividends and other measures in order to cover loan losses (See: " Banking's Mean Season"). And as a result, dividend yields have suffered. Index component Provident Bankshares (nasdaq: PBKS - news - people ) slashed its dividend in April. Provident Bank's parent company unveiled a capital-bolstering plan on April 11 that included the issuance of $65.0 million in securities and a $50.0 million subordinated debt offering for a total of $115.0 million in new capital. The plan also included a dividend reduction to 44 cents a share, annually for yearly savings of $29.0 million.
National City (nyse: NCC - news - people ) has cut its dividend twice this year--most recently, to a quarterly dividend of 1 cent a share from 21 cents a share, for a paltry yield of 0.8%.
By comparison, regional banks with steady dividends like Comerica (nyse: CMA - news - people ) and Fifth Third Bancorp (nasdaq: FITB - news - people )--both of which ranked on last year's Index at fourth and seventh, respectively--still have strong dividend yields at 8.3% and 12.0%. However, with shares of Comerica down 26.7% and Fifth Third's stock down 41.5% since the beginning of the year, it's clear that investors are still concerned about massive write-offs and those dreaded dividend cuts.
Financials on the cheap
We will not have another Bear, Stears that is. .Lehman Brothers' shares surged 10.5 percent on Friday, snapping back after five days of declines, as investors looking for cheap stocks bought shares and some short-sellers closed out their positions, which is what any good advisor would suggest. There will be huge margin calls early next week as well.
The investment bank's shares fell by nearly a third between last Friday and Thursday's close, after it said on Monday that it expected to post a roughly $2.8 billion quarterly loss and about $3.7 billion of writedowns.
On Thursday, the company demoted its chief financial officer and chief operating officer amid a crisis of confidence in the bank's management.
At Thursday's close, Lehman's shares traded at less than 70 percent of their book value, or the company's net accounting value. That valuation often brings value investors into the market, analysts said."People do not expect Lehman to go the way of Bear Stearns," said Helena Ocampo, an analyst at Sentinel Investments in Montpelier, Vermont, which does not own Lehman shares.
Now is the time to buy Lehman, its $15 less than Morgan Stanley and Merril Lynch, and it does still show signs of life. However if you are looking for a good solid long term financial choice look at
PNC. It sforward P/E is above 10 and it has a diverse mix of incomes. I think the 52 week target is around 64.85. Plus PNC will not do what Key did and cut it dividend.
The investment bank's shares fell by nearly a third between last Friday and Thursday's close, after it said on Monday that it expected to post a roughly $2.8 billion quarterly loss and about $3.7 billion of writedowns.
On Thursday, the company demoted its chief financial officer and chief operating officer amid a crisis of confidence in the bank's management.
At Thursday's close, Lehman's shares traded at less than 70 percent of their book value, or the company's net accounting value. That valuation often brings value investors into the market, analysts said."People do not expect Lehman to go the way of Bear Stearns," said Helena Ocampo, an analyst at Sentinel Investments in Montpelier, Vermont, which does not own Lehman shares.
Now is the time to buy Lehman, its $15 less than Morgan Stanley and Merril Lynch, and it does still show signs of life. However if you are looking for a good solid long term financial choice look at
PNC. It sforward P/E is above 10 and it has a diverse mix of incomes. I think the 52 week target is around 64.85. Plus PNC will not do what Key did and cut it dividend.
Monday, June 9, 2008
iTold YouSo
Apple Inc. has unveiled an upgraded iPhone with a faster Internet connection and GPS capabilities.Analysts have said Apple needed to upgrade the iPhone's Internet connection to work over so-called 3G, or third-generation, wireless networks to hit its target of selling 10 million of the devices by the end of 2008. An 8 gigabyte model is to sell for $199 starting July 11.
The addition of global-positioning technology improves the iPhone's accuracy in locating users. Current versions use a combination of cell phone towers and Wi-Fi locations to do the same thing.
Chief Executive Steve Jobs showed off the phone at Apple's Worldwide Developers Conference in San Francisco.
Wednesday, June 4, 2008
Housing Market
LOS ANGELES - Ed McMahon, who for decades appeared as Johnny Carson's sidekick on "The Tonight Show," is fighting to avoid foreclosure on his multimillion-dollar Beverly Hills home, according to published reports.
The former "Star Search" host was $644,000 behind on payments on $4.8 million in mortgage loans when a unit of Countrywide Financial Corp. filed a default notice Feb. 28 with the Los Angeles County Recorder's Office, The Wall Street Journal first reported late Tuesday.
McMahon, 85, has been a pitchman for the American Family Publishers' sweepstakes.
However, he has been unable to work as a pitchman for various products since he broke his neck 18 months ago, said his spokesman, Howard Bragman.
"There are plenty of people affected by the weak economy, bad housing market or bad health," Bragman said.
McMahon has been in "very fruitful discussions" with the lender to resolve the situation, Bragman said. But it's unclear whether McMahon and his wife, Pamela, will remain in the home.
A telephone message left for Countrywide early Wednesday was not immediately returned.
The six-bedroom, five-bath house is in a hilltop gated community overlooking Mulholland Drive called The Summit and is listed for sale at $6.25 million. It has been on the market two years, according to real estate agent Alex Davis, who has the listing.
The house is near that of pop star Britney Spears, which doesn't always work in its favor. "When we were trying to sell the house one time, there were about 100 paparazzi there," Davis said.
The former "Star Search" host was $644,000 behind on payments on $4.8 million in mortgage loans when a unit of Countrywide Financial Corp. filed a default notice Feb. 28 with the Los Angeles County Recorder's Office, The Wall Street Journal first reported late Tuesday.
McMahon, 85, has been a pitchman for the American Family Publishers' sweepstakes.
However, he has been unable to work as a pitchman for various products since he broke his neck 18 months ago, said his spokesman, Howard Bragman.
"There are plenty of people affected by the weak economy, bad housing market or bad health," Bragman said.
McMahon has been in "very fruitful discussions" with the lender to resolve the situation, Bragman said. But it's unclear whether McMahon and his wife, Pamela, will remain in the home.
A telephone message left for Countrywide early Wednesday was not immediately returned.
The six-bedroom, five-bath house is in a hilltop gated community overlooking Mulholland Drive called The Summit and is listed for sale at $6.25 million. It has been on the market two years, according to real estate agent Alex Davis, who has the listing.
The house is near that of pop star Britney Spears, which doesn't always work in its favor. "When we were trying to sell the house one time, there were about 100 paparazzi there," Davis said.
Tuesday, May 20, 2008
Blind Money
WASHINGTON (Reuters) - The Treasury Department discriminates against millions of Americans who are blind or have poor vision by printing paper money that makes it impossible for them to distinguish between denominations, a federal appeals court ruled on Tuesday.
By a 2-1 vote, the court upheld a ruling by U.S. District Judge James Robertson in a lawsuit filed by the American Council of the Blind seeking to force the department to redesign the U.S. paper currency.
The group has proposed several possible changes, including different sized bills for different denominations, embossed dots and raised printing. The court called such accommodations reasonable, effective and feasible.
The council accused the department and Treasury Secretary Henry Paulson of violating the Rehabilitation Act, which was meant to ensure that people with disabilities can live independently and fully participate in society.
The court rejected the Treasury Department's arguments that accommodating the group's proposals would impose a costly and undue burden on the government.
The appeals court sent the case back to Robertson to decide on the specific steps to be taken in granting the group's request for relief.
"A large majority of other currency systems have accommodated the visually impaired, and the secretary does not explain why U.S. currency should be any different," Judge Judith Rogers wrote in the appeal court's opinion.
Rogers said millions of individuals with visual impairment face daily obstacles in using U.S. paper currency. She cited a 1995 study that found that more than 3.7 million Americans are visually impaired, of whom 200,000 are blind.
By a 2-1 vote, the court upheld a ruling by U.S. District Judge James Robertson in a lawsuit filed by the American Council of the Blind seeking to force the department to redesign the U.S. paper currency.
The group has proposed several possible changes, including different sized bills for different denominations, embossed dots and raised printing. The court called such accommodations reasonable, effective and feasible.
The council accused the department and Treasury Secretary Henry Paulson of violating the Rehabilitation Act, which was meant to ensure that people with disabilities can live independently and fully participate in society.
The court rejected the Treasury Department's arguments that accommodating the group's proposals would impose a costly and undue burden on the government.
The appeals court sent the case back to Robertson to decide on the specific steps to be taken in granting the group's request for relief.
"A large majority of other currency systems have accommodated the visually impaired, and the secretary does not explain why U.S. currency should be any different," Judge Judith Rogers wrote in the appeal court's opinion.
Rogers said millions of individuals with visual impairment face daily obstacles in using U.S. paper currency. She cited a 1995 study that found that more than 3.7 million Americans are visually impaired, of whom 200,000 are blind.
Tuesday, May 13, 2008
Bet on Black
Yesterday RIM made a slam dunk, with its latest shot into the arm of the wireless PDA customer. This new addictive toy is already turning heads. This comes on the heels of Blackberry's most successful entries the Pearl and the Curve. Blackberry got it right this time, or at least closer to right. They clearly are moving towards revolution and away form evolution.
The Bold, as its being called is feature rich and still manages to be small in size. Also it allows users to sync with iTunes; the addition of an expandable microSD slot will allow the Bold to double as a media player. Business people can now spend even less time with their families and more time with the Blackberry.
The unveiling is even more interesting because AT&T will have the exclusive rights to market the RIM handset when it is available in the U.S. later this year. AT&T already has exclusive U.S. rights to Apple's iPhone and a new high-speed version of the Apple handset is expected to be unveiled next month. Both devices are slated to operate on 3G high-speed UMTS/HSDPA networks.
RIM trumpeted the consumer features of the Bold, noting its 2 megapixel camera and video recording capability.
"While it is designed to meet the extensive requirements of the business professional during the day, the BlackBerry Bold smartphone also caters to the business person's consumer side," RIM's announcement stated. In a nod to Apple, RIM observed that BlackBerry Bold Media Sync users can sync with Apple's iTunes. The RIM handset also features several multimedia elements. The handset has dual stereo speakers and includes Roxio Media Manager and Roxio PhotoSuite 9 LE.
Let's wait and see how long it takes Blackberry to get a CDMA version off the shelf. The announcment of this will make the stock price jump over the next few months. If you dont get in now, you will miss the Curve. Do not wait to see the sales numbers, because iPhone is still king and migration takes longer than expected. Plus BlackBerry has experienced numerous delays with releases in the past.
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