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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Asymmetric who wrote (31252)	7/15/2008 7:52:17 AM
From: Madharry	Read Replies (1) \| Respond to of 78745

this is from the irish brokerage firm goodbody: AIB Group (Buy, Closing Price €7.60) M&T Q2 results come in behind consensus Analyst: Anna Lalor M&T announced its Q2 earnings numbers yesterday. GAAP diluted EPS of $1.44 was down 26% yoy and was 11% below the consensus mean of $1.622. However diluted net Operating EPS of $1.53, although down 25% yoy, was 1.5% below consensus adjusted EPS of $1.553. Net interest income was ahead 5% yoy, as average loans and leases grew 14% yoy (including Q4 acquisitions). Deposits grew 6% yoy. The net interest margin was down 28bps yoy to 3.39%, but was marginally better than 3.38% in Q108. Non interest income declined 4% yoy, with $21m decline in M&T's portion of operating profit from Bayview Lending Corp (a privately held commercial mortgage lender which has been affected by lower gains from securitisations due to the CMBS market disruption, with the loss reflecting to a large extent M&T's portion of severance costs). However, while this is expected to continue to a lesser extent in Q3, M&T does not at this stage believe that this business is permanently impaired. Expenses rose 7% yoy leading the efficiency (or cost income ratio) to rise to 52.4%, from 50.2% in Q207. The credit loss charge more than trebled yoy to $100m and net charge-offs rose 4.5x to $99m and represented 81bps of average loans, compared to 20bps at end Jun-07 and significantly up on 38bps at the end of Mar-08. The increase was mainly due to the deterioration in the residential property market, with almost 40% of net charge-offs relating to residential developers and loans to builders (up from 14% a year earlier), while net charge-offs from residential mortgage loans and home equity loans (both largely affected by Alt-A loans) were multiples of their Q207 levels. Non-performing loans amounted to 1.2% of period end loans, compared with 0.68% a year earlier and 1% at the end of March. The company believes that the Alt-A trends are stabilising, with a slight tick-down in delinquencies over the last two months. However, it noted that 25% of its c$2bn to residential home-builders is already in its criticised loan book, while SME credit quality has started to deteriorate and is expected to continue to do so. Tangible equity per share declined 1% yoy to $28.5. M&T accounted for 5% of AIB's PTP last year and is expected to account for 6% this year so any changes M&T forecasts would only have a modest impact on our AIB earnings estimates. M&T's shares fell 16% on yesterday following its earnings release. Fitch changes outlook to Negative from Stable Fitch yesterday changed its outlook on AIB from stable to negative, reflecting "some uncertainty over the intensity and duration of the economic slowdown, which could cause AIB's profitability and/or impaired loans to worsen more than expected". This is not completely unexpected with the ratings agencies having noted that any deterioration in the economic outlook for Ireland could see changes to their outlooks for the banks. Fitch has reaffirmed its Long-term Issuer Default AA- rating and it notes that a "good level of earnings should make higher loan impairments manageable" and highlight's that AIB's current ratings reflect its "sound profitability, good asset quality, limited market risk and acceptable capitalisation". It expects to review the ratings of the other large Irish banks in the coming days. yep. for me too. should have waited.