US Banks (2008)

Discuss your favourite picks, broker, and trading or investment style.
Locked
User avatar
investor99
Veteran Contributor
Veteran Contributor
Posts: 1003
Joined: 22 Nov 2006 20:53
Location: Brantford, Ontario
Contact:

US Banks (2008)

Post by investor99 »

In looking at U.S. banks I noticed Bank of America raises it's dividend consistently and their long term share price performance has been pretty good. I also like the fact that U.S. banks of this magnitude are more of a proxy to the global economy as opposed their Canadian counterparts. Therefore they offer a little diversification away from the Royals and Bank of Nova Scotia's of the world that rely on the Canadian economy and thus materials and energy.

BAC's yielding 4.10 which is better than any Canadian bank. BAC's P/E is 12.6 which is lower than most or all of Canada's banks.

The only thing that trips me up a bit is debt. Does anyone know why U.S banks carry so much debt? Citigroup has a d/e of 4.34 and a P/E of 12.5 and BAC's d/e is 2.98. While the Canadian banks seem to carry much less debt........what gives?
User avatar
Norbert Schlenker
Veteran Contributor
Veteran Contributor
Posts: 7960
Joined: 16 Feb 2005 09:56
Location: An Argument Surrounded By Water
Contact:

Post by Norbert Schlenker »

NormR wrote:As a buyer, I'm happy when things that I want to buy get less expensive. :)
Which is why it's even more important for you to talk Adrian out of keeping the price of these securities up. :lol:
Nothing can protect people who want to buy the Brooklyn Bridge.
nisser
Veteran Contributor
Veteran Contributor
Posts: 2079
Joined: 11 Nov 2007 21:24

Post by nisser »

I think I'll buy some if there's no more writedowns in the next 2 quarters but I very much doubt that there won't.
User avatar
kcowan
Veteran Contributor
Veteran Contributor
Posts: 16033
Joined: 18 Apr 2006 20:33
Location: Pacific latitude 20/49

Post by kcowan »

Customers, Not Brokers, Profited in an Odd 2007

Thanks to CDOs at al, the big companies took a bath.
But picking bottoms is not easy, as Bank of America found. Its $2 billion rescue of Countrywide Financial in August was hailed as a bold move at the time, but the price it paid looks very high now.
For the fun of it...Keith
User avatar
parvus
Veteran Contributor
Veteran Contributor
Posts: 10014
Joined: 20 Feb 2005 16:09
Location: Waiting for the real estate meltdown on Rua Açores.

Post by parvus »

Banks start 2008 under pressure
National City slashes dividend, sets layoffs; Zions, Horizon unveil charges
"Bank managers will make this the mother of all kitchen-sink quarters," Sandler O'Neill's Fitzgibbon said on Wednesday.
Goldman among firms that may benefit from crisis
AIG, Wells, U.S. Bancorp, Ameriprise may also capitalize, Bernstein says
"Given this backdrop, we think the start of the New Year will be a time for investors to shift their thinking from the losers to the winners: which financial services companies have the balance-sheet strength and strategic prowess to capitalize upon the various financial dislocations?" they wrote. "The opportunities seem quite wide, with multiple ways to play the upside."
Analyst says Citigroup is a buy despite challenges
The future earnings power of Citigroup "is not being recognized in the current price of this stock," the analyst said. Citigroup shares lost about 45% in 2007. "The stock allows one to invest in the world's financial growth better than any other company. Others perform in one part of the financial sector or operate in one portion of the world," Bove wrote. "There is not one that can achieve what Citigroup can achieve. Buy it."
OTOH ... OTOH. To Adrian's point, another day, another set of opinions and tomorrow will bring forth a different set of opinions. To pitz's point, who knows what evil is lurking on the balance sheets? I don't think the blood is on the streets yet.
Wovon man nicht sprechen kann, darüber muß man schweigen — a wit
Imagefiniki, the Canadian financial wiki Your go-to guide for financial basics
Image
mpav
Contributor
Contributor
Posts: 540
Joined: 12 Jul 2007 13:30
Location: Toronto/Croatia

Post by mpav »

Just reading into the National City announcement, and just noticed the market cap dipped below 10bn.

As long as I can remember that was a 20bnplus Bank, and just has been eaten alive. You can easily see that the midwestern regionals are all just waiting to get swallowed (Key & 53)....just don't think anyone wants to buy into the rust belt.
User avatar
adrian2
Veteran Contributor
Veteran Contributor
Posts: 13333
Joined: 19 Feb 2005 08:42
Location: Greater Toronto Area

Post by adrian2 »

Citi Investors Won't Kick This One Out of Bed with a Foolish Dividend Cut
Seeking Alpha contributor wrote:The quarterly cash cost of the dividend is approximately $2.9 billion. Everyone is well aware of the dividend coverage ratio and how ugly it looks. But given the scale of the problems facing Citigroup, $2.9 billion every 90 days is not going to solve anything worth solving. A cut or outright skip will just slam the share value down some more and affect their ability to manage their capital base.

So this talk of a coming dividend reduction begs more questions than it actually solves. Financial institutions have some options that normal companies do not. Quite frankly, if the large overseas investors and onshore political operators decide its worth more, it will be worth more. They are not going to kick this one out of bed with a foolish dividend cut.
User avatar
Mike Schimek
Veteran Contributor
Veteran Contributor
Posts: 2698
Joined: 04 Nov 2007 18:25
Location: Montreal, Quebec

Post by Mike Schimek »

It might not be prudent to count too much on Citi maintaining its dividend level;

I thought the same with Washington Mutual. On their last conference call they said that the last thing they would cut is dividends, and they sounded sincere. They said first they would stop doing share buybacks if they had to, and stop doing some other thing they mentioned, and that the last thing they would do is cut dividends. 3-4 weeks later they cut the dividend 60%(? don't recall exact amount). And I truly believe that they (the management) did not expect to do it 3-4 weeks earlier.

Mike
Research until your head hurts then scream Banzai!!! and charge fearlessly to victory or death!
User avatar
adrian2
Veteran Contributor
Veteran Contributor
Posts: 13333
Joined: 19 Feb 2005 08:42
Location: Greater Toronto Area

Post by adrian2 »

Mike Schimek wrote:It might not be prudent to count too much on Citi maintaining its dividend level
Even if they cut it, looking at the available examples of big Canadian banks which cut their dividends (NA about 20 years ago, BNS during WW II), their performance afterwards was quite acceptable.
User avatar
scomac
Veteran Contributor
Veteran Contributor
Posts: 7788
Joined: 19 Feb 2005 09:47
Location: The Gateway to Wine Country

Post by scomac »

adrian2 wrote:
Mike Schimek wrote:It might not be prudent to count too much on Citi maintaining its dividend level
Even if they cut it, looking at the available examples of big Canadian banks which cut their dividends (NA about 20 years ago, BNS during WW II), their performance afterwards was quite acceptable.
You don't have to go back that far, adrian. Both TransCanada and Telus cut their dividends around 2000. They've both done just fine since and raised their dividends to levels higher than they were before they cut them.
"On what principle is it, that when we see nothing but improvement behind us, we are to expect nothing but deterioration before us?"
Thomas Babington Macaulay in 1830
BRIAN5000
Veteran Contributor
Veteran Contributor
Posts: 9063
Joined: 08 Jun 2007 23:27

Post by BRIAN5000 »

scomac wrote:
adrian2 wrote:
Mike Schimek wrote:It might not be prudent to count too much on Citi maintaining its dividend level
Even if they cut it, looking at the available examples of big Canadian banks which cut their dividends (NA about 20 years ago, BNS during WW II), their performance afterwards was quite acceptable.
You don't have to go back that far, adrian. Both TransCanada and Telus cut their dividends around 2000. They've both done just fine since and raised their dividends to levels higher than they were before they cut them.
This is actually a stragety I read somewhere to buy after the pounding the stock gets after the dividend cut. Worked with TRP, MG.A barely moved.
User avatar
adrian2
Veteran Contributor
Veteran Contributor
Posts: 13333
Joined: 19 Feb 2005 08:42
Location: Greater Toronto Area

Post by adrian2 »

Investment Banks Look Good in '08 estimates 22% to 47% upside for various big US banks.
User avatar
adrian2
Veteran Contributor
Veteran Contributor
Posts: 13333
Joined: 19 Feb 2005 08:42
Location: Greater Toronto Area

Post by adrian2 »

And one of our very own contributorsis positive about Bank of America among other picks.
The Money Gardener wrote:I currently hold shares in the large U.S. institution Bank of America (BAC). When I bought BAC, my rationale was that as long as the company does not cut its dividend I would be a happy camper holding the shares: BAC was yielding around 6% and has a legendary history of swiftly growing their dividend ever year.

While the share price drifts with the ups and downs of investor sentiment, I am still paid 6% of my investment annually; on time every quarter. 6% is certainly nothing to sneeze at, but this dividend does come with some risk, as we all know the U.S. financial system is in peril currently.
User avatar
chiaroscuro
Veteran Contributor
Veteran Contributor
Posts: 3042
Joined: 09 Apr 2005 09:56
Location: SW Ontario

Post by chiaroscuro »

adrian2 wrote:Investment Banks Look Good in '08 estimates 22% to 47% upside for various big US banks.
Bwhahaha :twisted: :twisted: , most pundits say stay away from banks unless a) you have the stomach and spare change to gamble, b) you have a long time horizon.

A survey of mutal fund advisors found that they were the most negative about this sector, of all sectors. The only thing going for US banks is that they have depreciated so much and so quickly that there is bound to be a dead cat bounce.

US banks start reporting next week, prepare for fresh lows!!!
Last edited by chiaroscuro on 10 Jan 2008 08:07, edited 1 time in total.
"Common sense is the collection of prejudices acquired by age eighteen." ~~AE
User avatar
adrian2
Veteran Contributor
Veteran Contributor
Posts: 13333
Joined: 19 Feb 2005 08:42
Location: Greater Toronto Area

Post by adrian2 »

chiaroscuro wrote:Bwhahaha
Such a nice English word - same to you.
chiaroscuro wrote:US banks start reporting next week, prepare for fresh lows!!!
Thank you for the crystal ball -- I'm ready to buy more if that happens.
User avatar
chiaroscuro
Veteran Contributor
Veteran Contributor
Posts: 3042
Joined: 09 Apr 2005 09:56
Location: SW Ontario

Post by chiaroscuro »

All I can say is prepare for more opportunity. :? :D
"Common sense is the collection of prejudices acquired by age eighteen." ~~AE
User avatar
patriot1
Veteran Contributor
Veteran Contributor
Posts: 4883
Joined: 28 Feb 2005 03:53

Post by patriot1 »

scomac wrote: Both TransCanada and Telus cut their dividends around 2000. They've both done just fine since and raised their dividends to levels higher than they were before they cut them.
Share prices of both took a big beating after the dividend cut. Would you believe I bought both of them on the dips, and still hold both after some profit taking.

Which inclines me to wait and see on the US banks. If you think 2007 was nasty, there's plenty more where that came from.
User avatar
beluga
Contributor
Contributor
Posts: 263
Joined: 08 Jun 2006 18:07
Contact:

Citigroup, Merrill seek fresh capital injections (Jan 10)

Post by beluga »

http://www.marketwatch.com/enf/rss.asp? ... =rss&rss=1

"Wall Street giants Citigroup and Merrill Lynch & Co. are both negotiating further capital injections from overseas investors as they continue to suffer from the credit market crisis, according to a published report Thursday."
User avatar
chiaroscuro
Veteran Contributor
Veteran Contributor
Posts: 3042
Joined: 09 Apr 2005 09:56
Location: SW Ontario

Post by chiaroscuro »

patriot1 wrote:
scomac wrote: Both TransCanada and Telus cut their dividends around 2000. They've both done just fine since and raised their dividends to levels higher than they were before they cut them.
Share prices of both took a big beating after the dividend cut. Would you believe I bought both of them on the dips, and still hold both after some profit taking.

Which inclines me to wait and see on the US banks. If you think 2007 was nasty, there's plenty more where that came from.
Nothwithstanding that one should generally avoid weak sectors, if the "bargin nature" of US banks have you drolling, a pundit said wait for a bank failure first before jumping in. Reading between the lines, he believes that another shoe has still yet to fall, and that your money can do better until that time in another investment. A dividend cut from any of the majors would tank the whole sector, as would further write-offs, or new problems. Cash injections from SWF would increase the price of bank stocks.
"Common sense is the collection of prejudices acquired by age eighteen." ~~AE
User avatar
adrian2
Veteran Contributor
Veteran Contributor
Posts: 13333
Joined: 19 Feb 2005 08:42
Location: Greater Toronto Area

Post by adrian2 »

chiaroscuro wrote:Nothwithstanding that one should generally avoid weak sectors, if the "bargin nature" of US banks have you drolling, a pundit said wait for a bank failure first before jumping in.
Another pundit, winner of the esteemed 2007 FWF Gummy Gold sector award. 2nd place overall, wrote today "prepare for fresh lows!" - and look what Mr. Bernanke gave us:

C -> up more than 2%
US Financials ETF -> up more than 2%
WM -> up more than 14%
CM -> up more than 3%

OTOH, he also wrote "there is bound to be a dead cat bounce" - call the SPCA, an animal is being tortured :lol:.

By all means, follow all the pundits, that's the road to riches, never make your own judgment and be a contrarian, just follow the crowd.
User avatar
Norbert Schlenker
Veteran Contributor
Veteran Contributor
Posts: 7960
Joined: 16 Feb 2005 09:56
Location: An Argument Surrounded By Water
Contact:

Post by Norbert Schlenker »

A friendly wager, Adrian. It looks like I'll be in Hogtown in June so we can settle then.

Let's put a beer on whether an equal weighted portfolio of the four you mentioned is higher or lower at that time. I'll take lower. (Forget the exchange rate. We'll just measure each one in its native currency and take a simple average.)

Are you game?
Nothing can protect people who want to buy the Brooklyn Bridge.
User avatar
chiaroscuro
Veteran Contributor
Veteran Contributor
Posts: 3042
Joined: 09 Apr 2005 09:56
Location: SW Ontario

Post by chiaroscuro »

adrian2 wrote:
chiaroscuro wrote:Nothwithstanding that one should generally avoid weak sectors, if the "bargin nature" of US banks have you drolling, a pundit said wait for a bank failure first before jumping in.
Another pundit, winner of the esteemed 2007 FWF Gummy Gold sector award. 2nd place overall, wrote today "prepare for fresh lows!" - and look what Mr. Bernanke gave us:

C -> up more than 2%
US Financials ETF -> up more than 2%
WM -> up more than 14%
CM -> up more than 3%

OTOH, he also wrote "there is bound to be a dead cat bounce" - call the SPCA, an animal is being tortured :lol:.

By all means, follow all the pundits, that's the road to riches, never make your own judgment and be a contrarian, just follow the crowd.
If the US major banks all hit their yearly low recently for 2008 I will give you my esteemed Gummy award. That one is dear to my heart, it's for predicting gold after all. Now if we hit fresh lows in the next two months, what do you have to offer? :P :wink: :lol:
"Common sense is the collection of prejudices acquired by age eighteen." ~~AE
User avatar
adrian2
Veteran Contributor
Veteran Contributor
Posts: 13333
Joined: 19 Feb 2005 08:42
Location: Greater Toronto Area

Post by adrian2 »

Norbert Schlenker wrote:A friendly wager, Adrian. It looks like I'll be in Hogtown in June so we can settle then.

Let's put a beer on whether an equal weighted portfolio of the four you mentioned is higher or lower at that time. I'll take lower. (Forget the exchange rate. We'll just measure each one in its native currency and take a simple average.)

Are you game?
Sure.

(edit to add today's prices)
C = $28.11 up $0.62
US Financials ETF (IYF) = $89.33 up $1.89
WM = $14.16 up $1.82
CM = $71.34 up $2.34
Last edited by adrian2 on 10 Jan 2008 19:12, edited 1 time in total.
User avatar
adrian2
Veteran Contributor
Veteran Contributor
Posts: 13333
Joined: 19 Feb 2005 08:42
Location: Greater Toronto Area

Post by adrian2 »

chiaroscuro wrote:If the US major banks all hit their yearly low recently for 2008 I will give you my esteemed Gummy award. That one is dear to my heart, it's for predicting gold after all. Now if we hit fresh lows in the next two months, what do you have to offer? :P :wink: :lol:
See above for the reply to Norbert. If you'd like a fresh bet, name your terms.
User avatar
investor99
Veteran Contributor
Veteran Contributor
Posts: 1003
Joined: 22 Nov 2006 20:53
Location: Brantford, Ontario
Contact:

Post by investor99 »

Wow this thread is getting interesting.... :)

Adrian, Jim Cramer just called the bottom on C, WM, etc. so you have at least one 'pundit' on your side...
The best time to plant an Oak tree was twenty five years ago. The second best time is now.
--
http://themoneygardener.com/
Locked