<<What evidence can you give that banks are in trouble?>>
While the term"Trouble" may not accurately indicate the degree, here are some problems:
Monday December 24, 2:47 pm Eastern Time
Press Release
SOURCE: TD Bank Financial Group
TD Bank Comments on Exposure in Argentina
TORONTO, Dec. 24 /CNW/ - In response to inquiries received as a result of rapidly unfolding developments in Argentina, TD Bank is announcing the following exposure in Argentina:
U.S. $76 million to several banks in Argentina.
U.S. $99 million to the commercial and industrial sector, of which U.S. $10 million is covered by Political Risk Insurance.
For further information
Kelly Hechler, Media Relations, TD Bank Financial Group, 416-982-2469
biz.yahoo.com
Tuesday December 25 10:05 AM ET
Banks, Brokers Wait for Rebound
By Brian Kelleher
NEW YORK (Reuters) - Wall Street slowly is crawling back from the worst slump in a decade, but bankers and brokers are unlikely to see a return to the halcyon days of dot-com deals and wild popular enthusiasm for stocks.
``In general, we're not expecting a big uptick next year versus this year in terms of revenue levels,'' Steve Crawford, chief financial officer of Morgan Stanley (NYSE:MWD - news), said on Wednesday after his company posted a 28-percent decline in quarterly profits.
Mergers and stock offering volumes -- which drive Wall Street profits -- recovered a bit at the end of 2001, but are far from the robust levels of the late 1990s and early 2000. The slowdown has spurred thousands of layoffs and deep bonus cuts, recalling the grim days and mass layoffs of the early 1990s.
Banks are eking out bigger lending profits thanks to 11 interest rate cuts by the U.S. Federal Reserve (news - web sites). But lending, whether to big companies or individuals, poses greater risks these days as the recession bumps up loan defaults.
``Next year is probably going to be a difficult year for the banking industry,'' said George Bicher, a bank analyst at Deutsche Banc Alex. Brown. ``Capital markets are likely to be a little bit better but probably not that much, and credit costs are not going to come down that much.''
Earnings at some of Wall Street's biggest firms -- including Morgan Stanley and Goldman Sachs Group Inc. (NYSE:GS - news) -- aren't expected to improve until the second half, according to estimates from market research firm Thomson Financial/First Call.
Credit cards did well during the year, but the Sept. 11 attacks have spooked travelers, who typically charge hotels and airline tickets. And bad loans are rising, as layoffs across the nation make it harder for people to pay their bills.
Bonds were a bright spot all year, but some market watchers say the fixed income business has peaked, which would be bad news for securities firms.
``They're worried about the breaks getting slammed in fixed income, like fixed income drying up overnight, and equity and (mergers and acquisitions) not coming back fast enough,'' said Reilly Tierney, an analyst at Fox-Pitt, Kelton. ``That scenario is right now in place.''
OTHER SHOE DROPS
The Sept. 11 attacks had a profound effect on the financial services sector, as many firms lost employees and were displaced from their headquarters. A four-day stock market shutdown disrupted business, and stock markets opened on Sept. 17 to their worst week since the Great Depression.
``September was more the second shoe falling,'' said Tom Ortwein, managing director of U.S. Equity Capital Markets for CIBC World Markets. ``The first shoe fell when the market cracked back in the spring of 2000.''
Most economists agree that lower interest rates and increased government spending have already laid the foundations for a solid recovery. But in the short term, economic conditions remain weak, meaning banks face a greater risk of companies and individuals defaulting on their loans.
Thousands of employees in the financial services sector were let go this year in an attempt to boost profit margins. American Express Co. (NYSE:AXP - news) cut more than 14,000 jobs this year, while Merrill Lynch & Co. Inc. (NYSE:MER - news) has trimmed its workforce by more than 8,000 through layoffs and buyout offers, and has indicated more cuts are on the way.
J.P. Morgan Chase & Co. Inc. (NYSE:JPM - news) is cutting about 8,000 jobs as it continues to digest the merger between J.P. Morgan and Chase. The layoffs may be coming to an end, but firms are far from going on hiring binges.
``In the scenario of a moderate uptick in the underlying markets and the economy, you will see a reasonable strategic and selective hiring,'' said Michael Franzino, at managing at executive search firm Heidrick & Struggles (Nasdaq:HSII - news). ``It will start out slower rather than faster. Nothing's going to happen until the underlying markets get some traction and move forward.''
CONFLICTS OF INTEREST
Conflicts of interest on Wall Street will remain a hot-button issue. Analysts won't make negative comments about the companies they cover for fear of losing investment banking businesses, critics say. By the same token, bankers' strategic advice can be tainted if their bank also provides loans to the corporate client.
The Enron Corp. (NYSE:ENE - news) debacle brought these issues front and center.
The energy trader chose Citigroup Inc. (NYSE:C - news) and J.P. Morgan, two of its creditors, to advise on a proposed sale to rival Dynegy Inc. (NYSE:DYN - news) Goldman, which pitched its services to Enron but had earlier declined to provide financing, was passed over.
Citigroup and J.P. Morgan were left holding the bag when the Dynegy deal collapsed -- wiping out any advisory fees -- and Enron filed for the biggest bankruptcy in U.S. history.
``Do you want your advisor to be a significant principal, and what issues does that create?'' Morgan Stanley's Crawford said. ``Objective advice is very important, particularly when you have companies in transition.''
The integrity of brokerage research came under fire during the year as many analysts maintained ``buy'' ratings despite plummeting stock prices.
In the case of Enron, five of the sixteen analysts covering the company rated it a ``strong buy'' as late as a day before its shares tumbled to penny stock levels. Three other analysts rated it a ``buy'' and only two recommended selling the shares.
dailynews.yahoo.com
"Top brokerage houses extended a tumble on Tuesday on fears that Argentina's default on its debt, combined with the collapse of energy trader Enron Corp (NYSE:ENE - news), could further deter investors from putting money into risky assets."...
"Lending by Japanese banks to Argentina totalled $1.738 billion as of end of June 2001. Of that, $389 million was for the public sector.
Mitsubishi Tokyo Financial Group , Japan's largest lender to Argentina, put on 0.59 percent to 851,000 yen."
biz.yahoo.com |
