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Profile: Oppenheimer & Co.
Oppenheimer & Co. was a participant or observer in the following events:
The financial industry may cut as much as $2 trillion in credit card account lines over the next 18 months, according to Oppenheimer & Co analyst Meredith Whitney. This is in an effort to reduce damage risks from increasing customer delinquencies and defaults. “[W]e expect available consumer liquidity in the form of credit-card lines to decline by 45 percent,” she adds. According to Whitney, all three remaining major banks—Bank of America, Citigroup, and JP Morgan Chase—are planning or considering reducing credit lines across the board. Credit cards are the second source of liquidity available to consumers, behind wages from work. She criticizes the banking industry for offering ever fewer choices at a time when consumers need credit more than ever: “Pulling credit when job losses are increasing by over 50 percent year-over-year in most key states is a dangerous and unprecedented combination, in our view.” [Consumer Affairs.com, 12/1/2008; Reuters, 12/1/2008]
Wells Fargo, the second largest home lender in the US, posts a surprising record first-quarter profit, outperforming the most hopeful estimates on Wall Street. The bank’s earnings are the most since July 16, 2007, with shares down 33 percent in 2009. The report also states that Wachovia Corporation, acquired by Wells Fargo in October 2008, is exceeding expectations. According to data compiled by Bloomberg, Wachovia’s $101.9 billion in losses and writedowns are the most for any US lender, and its adjustable-rate home loans are considered among the industry’s riskiest. Yet, in its preliminary report, Wells Fargo states that acquiring Wachovia “has proven to be everything we thought it would be.” Official first-quarter results will be released the third week in April.
Other Banks Also Gain; Profits Expected - The preliminary earnings report rallies the stock market, and the S&P 500 caps a fifth consecutive weekly gain and adds 3.8 percent to a two-month high of 856.56, the longest stretch since the bear market began in October 2007. The Dow Jones Industrial Average rises 246.27, to 8,083.38. The largest US lender, Bank of America, gains 35 percent today; JPMorgan 19 percent, and Citigroup 13 percent. The 24-company KBW Bank Index surges 20 percent, its biggest one-day gain since May 1992. Oppenheimer & Co. analyst Chris Kotowski says of these firms, “Barring an act of God, they had better report some number that is in the black or potentially risk being involved in some of the most intense securities litigation on record.”
Accounting Rules May Have Helped Profit Statements - Christopher Whalen, a managing director of Risk Analytics, says that the Financial Accounting Standards Board’s relaxation of accounting rules may have helped banks—including Wells Fargo—report a profit. “Most analysts are expecting loss rates to be much, much higher than we have seen in the last 20 to 30 years, even longer,” he says. “Given that, provisions of the large banks are not high enough.”
Wells Fargo 'Underperforming?' - While Wells Fargo Chief Financial Officer Howard Atkins says that increasing the bank’s provision for loan losses to $23 billion is adequate compared with other large US banks, FBR Capital Markets analyst Paul Miller wrote in a report that the bank’s addition of a $4.6 billion provision was below his estimate of $6.25 billion. “We remain cautious based on what we don’t know.” Miller rates Wells Fargo shares “underperform” and said that the preliminary report did not contain the percentage of non-performing loans and trends in Wachovia’s option-adjustable rate mortgate portfolio, a percentage Miller deems important. Atkins says that Wells Fargo benefited from strong trading results at Wachovia’s capital markets business, which the bank continues to shrink. He said that the improvement will not reverse those plans. Approximately 75 percent of Wells Fargo’s mortgage applications are refinance. President Obama said that homeowner interest rates, at less than five percent, are the lowest since 1971, and that it was “money in their pocket” for homeowners. Wells Fargo’s biggest shareholder is Berkshire Hathaway Inc., an acquisitions and investments firm owned by Warren Buffett. [Bloomberg, 4/9/2009]
Entity Tags: Dow Jones Industrial Average, Christopher Whalen, Wells Fargo Bank, N.A., Bank of America, Wachovia Bank, N.A., Standard & Poor’s, Warren Buffett, Paul Miller, Howard Atkins, JP Morgan Chase, Chris Kotowski, Risk Analytics, New York Stock Exchange, Oppenheimer & Co.
Timeline Tags: Global Economic Crises
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