Friday, February 26, 2010

Financials in the Spotlight today ! 02.25.10

· Lloyds banking group have reported a net attributable loss for the year on a pro forma
basis of £8.1bn, compared to JPMe £7.2bn. This is impacted by several one off items, and
on an underlying basis excluding fair value adjustments and other items the group has
reported a loss before tax of £12.44bn compared to JPMe £12.3bn. This implies a H209 loss
of £4.7bn, vs. JPMe £4.6bn. Total income net of insurance claims was £24bn +3% higher
than JPMe £23.3bn mainly as a result of £1.5bn gain on capital transactions – note we had
£750mn in our number. Expenses came in at £11.6bn a fraction higher than JPMe £11.5bn.
Group provisioning came in a £24.0bn, 3% worse than JPMe £23.2bn, implying a H2
provision of £10.6bn vs. JPMe £9.8bn. This primarily driven by a higher than expected loan
loss impairment in International £4bn vs. JPMe £2.7bn. Carla Antunes da Silva

· FNM, FRE - Federal Housing Finance Agency acting director Edward DeMarco said on
Thursday the credit quality of the mortgages purchased and securitized by Fannie and Freddie
is "substantially superior" to their loan book during the height of the housing boom around
2005. Reuters
· Fannie, Freddie mortgage purchases - Freddie’s announcement was straightforward,
stating that buyouts would be 100% completed in February. But Fannie’s announcement was
more nuanced, with the timing of the purchases occurring “within a few month period.” we
believe the buyouts will be more front-loaded (i.e. occurring most likely in March). The
already skittish market may have reacted to the $9 billion in discount notes that Fannie issued
on Tuesday and the $7 billion on Wednesday. While it’s too early to know if this is the
beginning of a possible $70+ billion issuance program to buy out loans, we believe the
discount note market is deep enough to fund this. Our agency traders tell us that the GSEs
could issue about $20 billion per week of discos without moving the market. That means that
in a month they could issue the full amount of discos required to fund the buyouts. Besides,
Fannie could also let the portfolio runoff ($10-15 billion per month), sell rolls, or even sell
MBS to fund the purchases. Matthew Jozoff

· BXS - BancorpSouth issued a press release last night which indicated that the company is
delaying the filing of its 10-K (10-K filing deadline is Monday, March 1st) given that
management, in consultation with its auditor, believes asset quality indicators should be
further reviewed for the fourth quarter.
· Credit cards - 2 stories out Thurs: 1) BBG reporting that Sen Specter plans to introduce
legislation limiting interchange fees; 2) B Frank said such legislation isn't on his agenda this
year – both headlines hit Bloomberg during trading on Thurs.
· Principle reductions – a Treasury official on Thurs said it was open to making changes to its
housing foreclosure prevention plan, including forcing principle reductions; Phyllis Caldwell,
chief of the Treasury's Homeownership Preservation Office, said the department was open to
the idea – Reuters/DJ
· Foreclosure prevention – the White House may expand the foreclosure prevention plan by
banning all foreclosures unless they have been screened and rejected by the Home Affordable
Modification Program (HAMP). Bloomberg/NYT

· Hedge funds shy away from lowering their fees – just 10% of HFs expect to lower their
fees – FT
· Hedge fund disclosures to kick off in Sept - Hedge-fund managers starting in September
will have to start providing a raft of details on their investments and business activities, but
not individual stock positions (WSJ)
· CIT planning TALF-eligible debt deal; is marketing $667 million of bonds backed by
equipment debt; would be co’s first debt deal since emerging from bankruptcy – Bloomberg
· BSE Management LLC – William Isaac, the former FDIC chairman, is leading a group of
investors looking to raise ~$1B in order to buy failed lenders – Bloomberg
· Axa SA is preparing a new strategic plan that may be put into place by the end of the year,
Les Echos reported – Bloomberg
· AGO earnings - AGO reported pretax operating income of $229M vs. our $216M est.,
though its reported $0.91 operating EPS still beat consensus despite a higher tax rate in 4Q.
Aside from the tax rate there were very few surprises in the quarter as loss provisions came in
at $126M vs. our $120M estimate. Wessel

· CNO – reports EPS of .15 vs. St .20.
· PRE - announces 8M share repurchase authorization
· BLK – raises qtrly dividend 28% - was increasing the dividend by 22 cents to $1 a share (DJ)
· AIG – the co and Washington have scrapped a plan to use life insurance policy cash flows to
repay a $8.5B loan to the NY Fed. AIG now believes it can repay the $8.5 billion through
other means, such as with cash generated by its insurance businesses and asset sales – WSJ
· China Construction Bank Corp. (0939.HK) Chairman Guo Shuqing said Friday the bank
has no fresh fundraising plans, and it hasn't been asked to raise its capital adequacy ratio. DJ


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