iBankCoin
Home / CRONKITE (page 1182)

CRONKITE

Market Update: Bernanke Comments and More

Excerpt from Bernanke speech to community bankers: ‘Community bankers live and work where they do business, and their institutions have deep roots, sometimes established over several generations. They know their customers and the local economy. Relationship banking is therefore at the core of community banking. The largest banks typically rely heavily on statistical models to assess borrowers’ capital, collateral, and capacity to repay, and those approaches can add value, but banks whose headquarters and key decision makers are hundreds or thousands of miles away inevitably lack the in-depth local knowledge that community banks use to assess character and conditions when making credit decisions. This advantage for community banks is fundamental to their effectiveness and cannot be matched by models or algorithms, no matter how sophisticated’….

2) Natl Bank of Greece (NBG) reports FY10 results better than expected; Reports FY10 net income, ex-items, of EUR485 mln vs. EUR436 mln consensus; rev -6% YoY to EUR4.76 bln vs. EUR 4.59 bln consensus. Provisions +31% YoY to EUR1.365 bln The provision coverage ratio (+90dpd) stands at 55%. Strong liquidity, with the Group loan-to-deposit ratio at 103%; Greece 94%. Net ECB funding reduced by -€2.9 bln vs. Q3.10…

3) Compass Point is raising their tgt on Key Corp (KEY) to $10 from $9; find the risk/reward in shares of KEY attractive. They expect TBV to increase to $9.62 by 4Q12 ($9.00 by FY11) primarily due to the benefit of improving credit quality and lower expenses. Additionally, due to their expectations for continued contraction in their loan portfolio through 3Q11, they expect KEY’s Tier 1 common ratio will grow to over 11% by year-end. Longer-term, they believe KEY’s earnings power is masked by an expense base that is too high given the size of their loan portfolio.

4) Compass Point reiterates their sell rating on SunTrust (STI) and increases their tgt to $24 from $21 after a less dilutive than expected common capital raise. STI raising $1 bln in common equity to repay TARP was significantly below their $2.0B estimate. In their opinion, STI received a very favorable review from the Federal Reserve compared to their expectations. As a result of the TARP repayment, they are increasing their 2011 EPS est from ($0.22) to $0.19 and their 2012 EPS est from $1.18 to $1.63 (cons: $1.03, $2.29). Clearly the less dilutive capital raise is a positive, yet they still believe shares of STI are overpriced given credit, revenue, and expense risks over the next 12 months.

5) Bank of America (BAC) participated in the Comprehensive Capital Analysis and Review (“CCAR”) conducted by the Federal Reserve. The CCAR is a supervisory exercise with a stated purpose of assessing the capital planning process of major U.S. bank holding companies, including any planned capital actions such as the payment of dividends on common stock. As part of the CCAR supervisory exercise, co submitted to the Federal Reserve a comprehensive capital plan on January 7, 2011. The Capital Plan addressed many matters including maintaining co’s current common dividend in the first and second quarters of 2011, as well as a modest increase in its common dividend starting in the second half of 2011. On March 18, 2011, the Federal Reserve indicated that it objected to the proposed increase in capital distributions for the second half of 2011. Additionally, the Federal Reserve informed co that it could resubmit a revised comprehensive capital plan. Co will continue to work with the Federal Reserve and intends to seek permission for a modest increase in its common dividend for the second half of 2011, through the submission of a revised comprehensive capital plan to the Federal Reserve

The S&P 500 Financial Index slipped below the 220 level as a slew of negative headlines hurt the group. The sector had been holding the 220 area but news from BAC and another round of litigation caused the sector to slip below to the 217 area. Off note, the XLF firmly held the 16 level showing that investors are not afraid to step in and buy dips at critical levels. In an 8-K filing, BAC addressed its discussions with the Fed and announced that the Fed has actually refused there request to pay a dividend in the second half of 2011. This caught the market by surprise as most expected this to be a done deal given the news from the other 17 institutions (MET remains quiet). This certainly raised the concern about the mortgage and foreclosure issues facing the institution. In addition, a WSJ story noted that Credit Unions were now pursing action to recoup losses on investments they made with banks. Just another headwind and headache for the industry but the group continues to weather the storm.

News of note:

Comments »

Market Internals

The Dow is up 26 (0.2%) to 12045, the Nasdaq is up 3 (0.1%) to 2687 and the S&P 500 is down 1 (0.1%) to 1293. Action has come onbelow avg. volume (NYSE 350 mln vs. avg of 439 mln; NASDAQ 793 mln vs. avg. of 959 mln), with decliners outpacing advancers(NYSE advancers/decliners 1116/1737, NASDAQ advancers/decliners 955/1523) and with new highs outpacing new lows (NYSE new highs/new lows 44/16 and NASDAQ new highs/new lows 36/32).

Relative strength:
Silver Miners-SIL +3.6%, Copper Miners-COPX +3.3%, Gold Miners/Jr-GDX/J +2.7%, Base Metals-DBB +2.5%, Copper-JJC +2.4%, Natural Gas-UNG +1.8%, Indonesia-IDX +1.8%, Russia-RSX +1.7%, India-INP +1.7%, Chile-ECH +1.4%, Palladium-PALL +1.4%, Silver-SLV +1.4%, Metals and Mining-XME +1.3%, Crude Oil-USO +1.3%

Relative weakness:
Egypt-EGPT -7.6%, Cotton-BAL -2.8%, Sugar-SGG -2.2%, Coffee-JO -1.9%, Volatility-VXX -1.6%, Regional Banks-KRE -1.4%, Grid Infrastructure-GRID -1.3%, Banks-KBE -1.1%, REITs-ICF -1.1%, Airlines-FAA -0.9%, Ag-DBA -0.9%, Pound-FXB -0.9%, Japan-EWJ -0.9%

Comments »

Oil Inventories: Previous 1.745M , Market Expects 1.500M, Actual Build of 2.131M

Dept of Energy reports that:

  • Crude oil inventories had a build of 2131K (consensus is a build of 1500K)
  • Distillate inventories had a build of 7K (consensus is a draw of 1500K)
  • Gasoline inventories had a draw of 5320K (consensus is a draw of 2000K)
  • The change in refinery utilization was 0.70% (consensus is 0.40%)

Production: U.S. crude oil refinery inputs averaged 14.3 mln bpd during the week ending March 18, 167 thousand bpd above the previous week’s average. Refineries operated at 84.1 percent of their operable capacity last week. Gasoline production increased last week, averaging 9.0 mln bpd. Distillate fuel production increased last week, averaging 4.3 mln bpd.

Imports: U.S. crude oil imports averaged nearly 9.0 mln bpd last week, up by 306 thousand bpd from the previous week. Over the last four weeks, crude oil imports have averaged nearly 8.5 mln bpd, 393 thousand bpd below the same four-week period last year. Total motor gasoline imports (including both finished gasoline and gasoline blending components) last week averaged 695 thousand bpd. Distillate fuel imports averaged 192 thousand bpd last week.

Inventory: U.S. commercial crude oil inventories (excluding those in the Strategic Petroleum Reserve) increased by 2.1 mln barrels from the previous week. At 352.8 mln barrels, U.S. crude oil inventories are above the upper limit of the average range for this time of year. Total motor gasoline inventories decreased by 5.3 mln barrels last week and are in the upper limit of the average range. Both finished gasoline inventories and blending components inventories decreased last week. Distillate fuel inventories remained unchanged and are above the upper limit of the average range for this time of year. Propane/propylene inventories decreased by 0.4 mln barrels last week and are in the lower limit of the average range. Total commercial petroleum inventories decreased by 0.9 mln barrels last week.

Demand: Over the last four weeks, motor gasoline product supplied has averaged about 9.1 mln bpd, up by 1.2 percent from the same period last year. Distillate fuel product supplied has averaged nearly 3.9 mln bpd over the last four weeks, up by 3.6 percent from the same period last year.

Comments »

This Morning’s Option Activity

Taking an early look at the options market, we found the following names that may be worth watching throughout the day for further indication of investor expectations given their options volume and implied volatility movement.

Stocks seeing volatility buying (bullish call buying/bearish put buying):

Calls:

  • MU Apr 11 calls are seeing interest with 6170 contracts trading vs. open int of 110.8K, pushing implied vol up around 3 points to ~55% — co is expected to report earnings late March.
  • DLTR May 57.5 calls are seeing interest with 2270 contracts trading vs. open int of 60, pushing implied vol up around 1 points to ~31% — co is expected to report earnings mid May, possibly falling within the expirations cycle.

Puts:

  • TOL Apr 20 puts are seeing interest with 2000 contracts trading vs. open int of 3540, pushing implied vol up around 3 points to ~35%

Stocks seeing volatility selling:

  • ADBE, GIS, DGW, DFS and JBL implied vol is lower following earnings/guidance

Sentiment: The CBOE Put/Call ratio is currently: 0.95.. VIX: (20.95, +0.74, +3.7%).
*Please use the Talk to Us link at the top of the page to provide feedback on this comment as well as the OPTNX comments.

Comments »