GLG News by Mr. Bill Bradway, Founder & Managing Director
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
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Citigroup: Will Breaking Up Be Hard to Do (Well)?
January 15, 2009
Citigroup Plans to Split Itself Up, Taking Apart the Financial Supermarket | www.nytimes.com
Citigroup, still suffering from credit related losses, is now planning to spin its Smith Barney unit into a joint venture with Morgan Stanley. Other Citigroup business units are rumored to be on the block for divestiture. Government regulators appear to be forcing this action to happen sooner rather than later. Can Citigroup succeed at breaking up its financial supermarket? Is this the end of the financial supermarket model for all big banks?
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Time to Say Goodbye to the Old American Mortgage Pie?
July 14, 2008
U.S. Weighs Takeover of Two Mortgage Giants | www.nytimes.com
The news that Treasury Secretary Paulson and Fed Chairman Bernanke are trying to reassure the broader markets that Fannie Mae (FNM) and Freddie Mac (FRE) will not be allowed to fail has not produced the expected calming effect on the markets. Shares of both firms have plunged into single digits. Who would have thought that FNM and FRE would become disastrous ticker symbols whose survival is now being debated? The full faith and credit of the US government is being tossed out as a lifeline, if necessary. Whom would such a lifeline rescue? What will happen to mortgage products, origination – packaging – servicing business models, and the overall housing market?
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Delinquencies Sprout Like Weeds: Time For a Pain Check
June 6, 2008
Delinquencies and Foreclosures Increase in Latest Mortgage Bankers Survey | www.mortgagebankers.org
Adverse news continues to sprout headlines describing the expansion of delinquencies into new corners of the US bank and thrift loan portfolios. The Mortgage Bankers Association reported that 1Q2008 mortgage delinquency and foreclosure rates continued to expand abovemuch 4Q2007 levels and are now much higher than 1Q2007. How many forced transactions (e.g., Countrywide - Bank of America) or outright failures are likely? Which institutions are inching closer to the edge of extinction?
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First Boom, Now Bust Burns An Aggressive Banker
May 19, 2008
A Gamble That Went Bust | online.wsj.com
The housing bust has already made headlines from the subprime fallout, claiming dozens of mortgage banks, producing asset write offs approaching $300 billion on a global basis, and forcing many of the largest financial institutions to raise billions in new capital. Now smaller banks are going over the cliff at the expense of its shareholders and the FDIC. How many other banks are destined to fail? What are the drivers that will determine bank failures?
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WaMu Takes $7 Billion; Pain for Some, Gain for New Investors
April 10, 2008
WaMu's Costly Rescue | online.wsj.com
Washington Mutual (WaMu) cut a deal with TPG and other investors for a $7 billion capital injection by issuing common stock and preferred convertible stock. In addition, 1st quarter write offs of $3.5 billion contributed to an estimated first quarter loss of $1.1 billion. Clearly WaMu needs capital, but is this the best option for existing shareholders? What is the upside for shareholders and the new investors? How long will WaMu's troubles last? Is WaMu destined to be acquired? If so, by whom?
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Big Banks for Sale: A Buyer's Market or Dilemma?
March 17, 2008
It's a Buyer's Market for Banks | online.wsj.com
A number of large banks are looking at severely depressed stock prices and multiples that have dropped to book value or below. Is now the time for a buyer to step up and buy a struggling bank? If not, when does it make sense for a buyer to cut a deal? Will existing M & A deals still close? What will be the impact on other market players and suppliers?
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Mortgage Market Woes Gather Steam and More Victims
March 7, 2008
Housing, Bank Problems Deepen | online.wsj.com
The US housing and mortgage crisis has mushroomed into a new level of adversity. When will this bleeding subside and ultimately come to an end? Is the market near a bottom yet? Are there any upside opportunities? Will the bank, thrift and mortgage industry's pain turn into someone's gain?
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Ready or Not: Here Comes Banco Wal*Mart
February 25, 2008
Wal-Mart Gets Its Bank - in Mexico | money.cnn.com
In November 2007, Wal-Mart de México (WMT) opened its first consumer bank, Banco Wal*Mart, in Toluca – an industrial town near Mexico City. The company plans to launch 80 more branches by the end of 2008. Will this initiative be successful? Will the established Mexican banking community suffer at the hands of Banco Wal*Mart? What will this initiative mean for Fidelity National Information Services (FIS), the bank’s new primary core banking and IT supplier?
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Citibank’s Branch Expansion Strategy: No Miracle Leads to Reality Check
January 24, 2008
Citi Prunes Its Branch Expansion | online.wsj.com
Citibank announced that it will cut back on its branch expansion strategy and may sell some recently opened branches due to high costs and/or poor results. Any future expansion initiatives are likely to be limited to larger markets. What are the implications for Citibank's future in retail banking? How can Citibank overcome its limitations in retail banking?
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Why Is Intuit Going Back to the Well on ECHO?
December 21, 2007
Intuit to buy Electronic Clearing House for $17 a share | www.marketwatch.com
Intuit Inc. (INTU) and Electronic Clearing House Inc., (ECHO), have signed another definitive agreement for Intuit to acquire ECHO. Under the terms of this agreement, Intuit will pay $17 per share in cash in exchange for each share of ECHO common stock, including shares tied to options. The total purchase price is approximately $131 million on a fully diluted basis. In December 2006 these firms agreed on a deal valued at $142 million, which was abandoned by both parties in March 2007. Why is Intuit still attracted to ECHO? Where is the upside in this deal?
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How Bad Can It (the Subprime Meltdown) Get?
December 17, 2007
Countrywide doubles foreclosures | www.ft.com
Banking, mortgage, capital markets and other industry participants are comparing the current “subprime” mortgage market meltdown to the U.S. Savings and Loan crises whose roots were caused by archaic deposit and loan regulations and nurtured under the Reagan administration’s hands off regulatory watch in the early 1980s. This latter crises cost the U.S. taxpayer over $125 billion by the time the bailout was authorized in 1991. How long will the current crisis last? Will Countrywide and other high volume subprime lenders survive? Will political initiatives from the Bush administration or Congress make a difference?
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Fidelity Exits Mortgage Business to Focus on Banking, Limit Risk
November 7, 2007
Fidelity National to Spin Off Mortgage Services | www.reuters.com
Fidelity National Information Services (FIS) announced it is spinning off its Lender Processing Services (LPS) business unit to its shareholders in a tax free exchange. The rationale is to focus on its “core banking and payments” business unit, Transaction Processing Services. In light of its recent large acquisition of eFunds, this divestiture announcement is noteworthy, in part due to the size of LPS. Is this a wise decision by Fidelity?
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Countrywide Lays an Egg - Is it Broken, Rotten, or Deviled?
October 30, 2007
Countrywide Swings to Steep Loss | online.wsj.com
Countrywide reported its long awaited 3Q earnings report with an update on its mortgage origination, servicing and thrift deposit business. The loss for 3Q was $1.2 billion, in the middle of the analyst estimates. However, while not as bad as some expected, the magnitude of CFC losing 20% of its equity in one quarter is still staggering and may call into question its ability to survive as an independent company. In spite of the 3Q earnings announcement concerning the portfolio write down and significant increase in loan loss provisions, several questions are still to be answered. How does the magnitude of the 3Q loss fit the numerous problems that Countrywide is facing? Will Countrywide live to generate the level of profits in 2005 or 2006? What are the consequences for the rest of the mortgage banking and thrift industry players?
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Cheers or Tears As Commerce Takes TD's Money?
October 4, 2007
Commerce Goes Canadian | online.wsj.com
Commerce Bank's Board and Management decided to take TD's cash and stock deal, valued at $8.5 billion, barely 90 days after founder Vernon Hill was ousted as Chairman and CEO. The deal is estimated to be worth about $42/share, less than $1 above CBH's all time high. Was the price right for shareholders at Commerce and TD Bank Financial Group? Can TD Banknorth profitably leverage the Commerce Bank branch deposit gathering network? Who will be the winners and losers from this deal?
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ACI Fills a Big (Payments) Hole in IBM's Banking Partner Base
September 11, 2007
ACI and IBM Collaborate to Support Core Payment Systems Refresh | www.tmcnet.com
This announcement has been a long time in the making for both ACI and IBM. ACI's Base 24-eps fills a large solution hole in the IBM partner directory. Is this a big deal or not? Who are likely to be the winners and losers from this partnership? What is the impact of this announcement on banks?
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Countrywide Layoffs Indicative of More Mortgage Market Pain
September 10, 2007
Countrywide Is to Cut 20% of Work Force | online.wsj.com
Countrywide projects a 25% decline in mortgage origination volume as the reason behind this dramatic employee layoff. Is Countrywide's new origination forecast in the ballpark? How far will the mortgage market fall? Will other institutions be affected too?
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Did Bank of America Pull a Warren Buffett?
August 23, 2007
Bank of America to Invest $2 Billion in Countrywide | online.wsj.com
Countrywide needed to restore investor confidence. Quickly lining up Bank of America as a substantial non-voting investor during the market turmoil came at a steep price. Did Bank of America emulate Warren Buffett on this deal?
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Has the Subprime Meltdown Created a New Credit Crunch Paradigm?
August 21, 2007
Like a House of Cards: In a Twist Folks Paying Other Bills, But Skip Mortgage | www.nypost.com
The latest data on mortgage and credit card delinquencies seems to run counter to conventional wisdom - that borrowers will keep paying the mortgage and default on unsecured debt, especially credit cards. Why would the subprime meltdown and rapidly rising foreclosures have no effect on credit card delinquencies? Is there a new credit crunch paradigm evolving?
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Wal-Mart Will Hedge Its Bet on Banking
August 20, 2007
WAL-MART: TO BOLDLY GO WHERE NO BANK HAS GONE BEFORE... | tendencias.infoamericas.com
The suggestion that Wal-Mart will boldly go where no bank has gone before raises several questions. How can Wal-Mart undercut competitor pricing in order to expand into banking? Is Wal-Mart willing to lose money from a banking strategy to gain market share? Does the unbanked and underbanked marketplace present a big market opportunity for Wal-Mart?
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Mortgage REITs Going Once, Going Twice, ....Gone?
August 8, 2007
Mortgage REITs Feel Squeeze | online.wsj.com
Mortgage REITs, a dividend paying equity vehicle that expanded with the mortgage industry in the past 10 years, have been facing a severe liquidity crises. The fallout that began with the subprime crises is spilling over to other types of mortgages, particularly the Alt-A mortgage. A virus-like illness has been spreading across sectors of the mortgage industry and has crippled several residential mortgage REITs. Can this mean the mortgage REIT is no longer viable? This past week a large public REIT, American Home Mortgage filed for bankruptcy and others may not be far from bankruptcy.
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