Is the Time to Invest in Banks approaching?

sabretoothtigger

Discussion on usa bank stress test and xlf, due this week i think

http://online.barrons.com/article/SB124145095811983643.html?ru=yahoo&mod=yahoobarrons


option prices for xlf
http://www.reuters.com/finance/stocks/option?symbol=XLF.P&expDate=6/2009

tradetime

sabretoothtigger wrote: »

Stops are a horrible way to trade, just reduce risk and sell a bit I think is best. They are too volatile
Selftrade has the best stop loss Ive seen where the stop loss contains a price percentage argument for the actual final sale otherwise you could end up selling as the price gaps lower then rises strongly



Heres a guy who lost 7k on a share that ended up on the day
http://www.bloomberg.com/apps/news?pid=20601087&sid=aVU0wJIkD1qc&refer=home

I'd say that is a rare case, one of the hazards of trading extremely volatile stocks, over the long run correctly used stops will save you far more money than they lose you, imho they are an integral part of risk management..

Though I do also agree with your view to take some off the table after a decent move, also a good money and risk mangement strategy.

sabretoothtigger

Thanks for the info on the xlf options broker btw, too expensive for me it seems.

I found its possible to spreadbet the xlf on a uk account, also the qqqq and its no hassle to do but really I wanted to take a short option, theres no way I can short with a spreadbet the way its rising, 8% today alone so as a hedge its no good there

tradetime

sabretoothtigger wrote: »

Thanks for the info on the xlf options broker btw, too expensive for me it seems.

I found its possible to spreadbet the xlf on a uk account, also the qqqq and its no hassle to do but really I wanted to take a short option, theres no way I can short with a spreadbet the way its rising, 8% today alone so as a hedge its no good there

You're welcome, interesting video here, with what I regard as the foremost banking analyst in the US.
Proshares funds do "short" etfs, or inverse ETFs', but you would need to be reasonably good on your timing, worth also knowing that there are a lot of problems with inverse etf's that has to be considered before using them, but they are still worth a look despite the bad press

sabretoothtigger

My timing sucks, so inverse etf wouldnt be good for me as that is a daytrade afaik.
But a short etf I can buy into that'll increase as the xlf falls, that'd be more like it, I think anyway

tradetime

sabretoothtigger wrote: »

My timing sucks, so inverse etf wouldnt be good for me as that is a daytrade afaik.
But a short etf I can buy into that'll increase as the xlf falls, that'd be more like it, I think anyway

Ah, ok, "inverse ETF's" and "short ETF's" are essentially the same thing, just a different name, they are best suited to daytrading, however they can be used over a longer period of time you just have to be very careful, the volatility associated with the financial sector means I wouldn't recommend a "short" financial ETF for anything beyond a day or two, and tbh I'd be reluctant to recommend it beyond intraday. The short Nasdaq products are safer for a longer hold, though they will decay a little over time.

sabretoothtigger

Might be simplest to just buy some gold, I notice the price rose back a bit recently perhaps this is the reason. Paulson bought a gold mine with his bank shorting profits I think

Maybe there is a covered warrant in the uk bank sector. In general just reinvesting elsewhere is best I think, I was quite pleased to see Elliott Wave intl. hype the sensex at 100k if you can believe that. I can, more then our markets long term anyway


http://www.youtube.com/watch?v=t1eRaWpRi78&feature=PlayList&p=57D1259C58BF9FAE&index=1








Article on bank stress tests flawed thinking

We Can't Subsidize the Banks Forever

Government has to show it can handle major insolvencies.



By MATTHEW RICHARDSON and NOURIEL ROUBINI

http://online.wsj.com/article/SB124147831175584985.html






Short ETC - https://www.selftrade.co.uk/market-data/etcs/etc-literature.php

sabretoothtigger

Barclays posts 15% rise in profits

Banking giant Barclays this morning reported a 15% rise in quarterly pre-tax profits despite a sharp increase in bad debts.

Pre-tax profits in the first three month of the year rose to £1,372m compared with £1,194m last time, while income increased 42% to a record £8,150m, driven by strong performances in Barclays Capital and by most of the international businesses within Global Retail and Commercial Banking.

Income growth was partially offset by significantly increased impairment charges of £2,309m from £1,290m previously. Costs rose 37% to £4,461m reflecting the impact of acquisitions during 2008 and increased levels of income-related expenses.

The bank also pledged to reinstate dividends for shareholders. “For 2009 we intend to make a cash payment in the fourth quarter with a final cash dividend for the year being declared and paid in the first quarter of 2010.”

Despite the economic environment, income at Global Retail and Commercial Banking increased 16% including strong growth across the international businesses.

Income at UK Retail Banking decreased slightly as the impact of liability margin compression more than offset higher income from Home Finance and Consumer Lending. Profit before tax dropped “significantly” partly due to higher impairment driven by increased delinquency in the consumer loan book and overdrafts.

Profit before tax at Barclaycard was slightly ahead of the prior year.

Income at Investment Banking and Investment Management increased 79% driven by Barclays Capital, partially offset by slightly lower income at Barclays Global Investors and Barclays Wealth as a result of challenging equity markets.

April trading has been generally consistent with the overall trend for February and March, the bank added.

Chief executive John Varley said the bank has benefitted from the diversification of its businesses.

”We generated strong income growth across most business lines driven by the investments we have made in expanding our international network and in buying Lehman,” he said.

“This, together with good cost control, has enabled us to shield the anticipated increase in impairment and absorb further credit market writedowns on legacy assets. We recognise the importance of continued capital generation and we remain committed to prioritising returns over growth and to reducing leverage.”

http://www.sharecast.com/cgi-bin/sharecast/story.cgi?story_id=2761235

Lloyds says corporate impairments on the rise


Part-nationalised bank Lloyds Banking Group said corporate impairment levels are rising significantly, but write-downs of investment securities have reduced significantly.

The group said that the bulk of the increased corporate impairments relate to assets scheduled to be included under the government’s Asset Protection Scheme.

The group is predicting at least a 50% rise in corporate impairments in 2009, with the commercial property portfolios in the UK and Ireland – an area to which HBOS has high exposure – particularly vulnerable.

The decline in equity markets in the first quarter and a widening of credit spreads in fixed income markets contributed to adverse volatility, excluding policyholder interests volatility, of £0.7bn.

Integration of recently acquired HBOS is proceeding smoothly, the group claimed.

‘New management is in place and we have achieved all of our integration goals for the first 100 days of the enlarged group,’ said group chief executive Eric Daniels.

The group delivered solid revenue growth in the first quarter of 2009, but margins have been hit by falling base rates and higher funding costs for the wholesale arm; these trends are expected to continue for the rest of the year.

During the first quarter of 2009, the percentage of the group's wholesale funding with a maturity of over one year continued to rise.

On the retail side, the group saw around half a million new current accounts opened during the first three months of the year and continued to increase its estimated market share of net new mortgage lending.

Retail banking revenues are slightly lower than last year, however, because of lower levels of payment protection insurance income and the impact of falling interest rates on deposit margins.

As announced in February of this year, the group expects to report a pre-tax loss this year, excluding the impact of a credit relating to negative goodwill.

Record quarter fires up Standard Chartered


News of record profits at Standard Chartered during the first quarter had the Far East focused bank sharply higher Tuesday.

It said a strong start to the year had led to its best quarter ever in terms of both profit and income, and its capital and liquidity position remains “excellent”.

Wholesale banking was partly to thank. Income was significantly ahead of last year, while growth in client income is still the main contributor to overall revenues.

A resilient consumer banking division also helped. Average monthly income levels beat the previous quarter, although fell short of last year’s equivalent.

Mortgages performed well, while corporate finance had a “very strong” first quarter and enjoys a “robust” deal pipeline.

In March, Standard reported a rise in 2008 pre-tax profit to $4.8bn from $4bn.

“What you're seeing is a very sharp, cyclical slowdown, as a result of collapsing demand in the West, but Asia doesn't face the same sort of structural de-leveraging that Western economies are going through,” explained chief executive Peter Sands at the time.

A pre-close trading statement is expected in June.

sabretoothtigger

A secretive international buyout firm is attempting to gatecrash Barclays’ £3 billion deal to sell iShares, part of the bank’s fund-management business. BC Partners, best known in Britain for buying the Foxtons estate-agency chain two years ago, has lodged an estimated £3.5 billion bid, writes the Sunday Times.

Meanwhile, the Independent on Sunday adds that Barclays Capital, the investment banking arm of Barclays, is on a hiring spree looking for another 100 bankers to build up its merger and acquisition activities as well as its E uropean equities business.

http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/5301932/Barclays-gets-two-more-offers-for-iShares.html





Interesting article on the billions being raised instantly by usa banks with new share capital, pretty impressive to me even though I guess its only 5 or 10% to them

http://www.marketwatch.com/news/story/bank-stock-relief-helps-sector/story.aspx?guid={2EA7739E-9F10-4FA3-9390-F1D49758B680}&dist=TQP_Mod_mktwN

There have also been signs that the rate of deterioration in the economy has slowed. That's helped lure some longer-term investors back into the banking sector.

"The feeling is that the environment has changed, that green shoots are in fact appearing and that will lead to a recovery in the banking industry," Nancy Bush, president of NAB Research LLC, said in an interview.

"Most traditional buyers of banks, like mutual funds, were woefully under-invested in the sector. Now that everyone has decided it's OK, everyone wants back in at the same time," she explained.
"It's a meltup, not a meltdown," Bush added.

One way to get back into bank stocks quickly is to sign up to buy big chunks of the new equity being offered by institutions like Wells Fargo and Morgan Stanley, she noted.

Despite such large sales of new stock, bank shares rallied on Friday, suggesting investor demand was strong.
Wells Fargo shares jumped 14% to close at $28.18. The stock has almost doubled since the end of the first quarter.
Morgan Stanley shares gained 3.9% to close at $28.20 and Bank of America climbed 4.9% to $14.17.

'Watershed'

"The stress test was a watershed event, both for the banks and the banking regulators," said Sean Egan, president of rating agency Egan-Jones Ratings. "Regulators had the opportunity to force the banks to raise substantially more capital. They decided against that and the required amounts are relatively modest."

If U.S. unemployment exceeds 10.3% -- the level used in the government's stress tests -- then banks may still need more capital, Paul Miller, an analyst at Friedman, Billings, Ramsey, wrote in a note to investors on Friday.

"Many market participants remain overly optimistic about the near-term earnings prospects of these companies given that real estate cycles typically take five to six years to work through," Miller added.

Fred Cannon, a bank analyst at Keefe, Bruyette & Woods, reckons the capital levels recommended by the government are enough for the banks to survive, but not for the industry to thrive.

"We do not think this is the defining capital raising in this severe economic cycle," Cannon wrote in a note to investors Friday.

sabretoothtigger

Barclays did end up today though they dropped midday, there was money to make for anyone thinking the ishares thing should see them positive.
Double touch at 272 seemed a clever buy I think, short term

The xlf dropped 6% today so I'm thinking medium term their time may be up.
Maybe it'll recover like it has before but Meredith Whitney has given out some realistic advice on these banks apparently, I shall see if I can get a link

Fri 08/05/2009 08:21
LONDON, May 8 (Reuters) - Royal Bank of Scotland Group PLC Chief Executive Stephen Hester and Finance Director Guy Whittaker told reporters on a conference call:
* CEO Hester says not seeing any 'green shoots', expects next two years to be
very difficult
* CEO Hester says well advanced with Asia banking sale process
* Royal bank of scotland finance director sees loan loss rate rising through
2009 and into 2010
* CEO says credit weakness increasing across all sectors, regions
* CEO says UK government showing no signs of changing terms of asset protection
scheme 'either positively or negatively'
* CEO sees 2009 bad debts at least 4 times the Q1 level
* CEO says expects to complete Asia assets sale over the summer

Meredith Whitney Says Banks Will Need More Capital

Twitter


In an interview on CNBC, Meredith Whitney said that this is not the last time banks will need to raise capital and that the core earnings power of banks is minimal. Whitney, who correctly called the banking crisis in last 2007, said that bank earnings in 2010-2011 will be below consensus estimates.

Since the interview, bank shares have fallen with Bank of America (NYSE:BAC) down 7%, JPMorgan (NYSE:JPM) down 7%, Wells Fargo (NYSE:WFC) down 5%, and Citibank (NYSE:C) down 3%.

http://www.businessinsider.com/meredith-whitney-i-predicted-the-bank-rally-2009-5



http://www.upsidetrader.com/2009/05/reason-speaks/