Opening Bell: 04.20.09

Publish date:

Apologies for the technical difficulties this morning. We're back up with (hopefully) no further interruptions.
BAC: $4.2 Billion (Bank Of America)

Bank of America Corporation today reported first-quarter 2009 net income of $4.2 billion. After preferred dividends, including $402 million paid to the U.S. government, diluted earnings per share were $0.44.
Those results compared with net income of $1.2 billion, or diluted earnings per share of $0.23 after preferred dividends, during the same period last year.
Results for the quarter include Merrill Lynch & Co., which Bank of America purchased on January 1, 2009, and Countrywide Financial, which was acquired on July 1, 2008. Merrill Lynch contributed $3.7 billion to net income, excluding certain merger costs, on strong capital markets revenue. Countrywide also added to net income as mortgage lending and refinancing volume increased. The year-ago period does not include Merrill Lynch and Countrywide results.
The company also took several actions in the quarter to enhance its capital and liquidity position, including strengthening its loan loss reserves and building its cash position.
"The fact that we were able to post strong, positive net income for the quarter is extremely welcome news in this environment," said Kenneth D. Lewis, chairman and chief executive officer. "It shows the power of our diversified business model as well as the ability of our associates to execute. We are especially gratified that our new teammates at Countrywide and Merrill Lynch had outstanding performance that contributed significantly to our success."

US to put conditions on Tarp repayment (FT)
There's a reason the US government is a lender of last resort, at least to Finance people; they never want to go home. It's a political thing: once you get your hands on to something that has some modicum of power, you can't let it go. Apparently the banks have plenty of capital; that's not that they're worried about. What they're really worried about is bank's willingness to loan during the recovery - the administration wants to make sure that there's credit flowing down to those in high need. In other words, let's stop taking houses away from people that can't afford them.
"The official, meanwhile, said banks that had plenty of capital and had demonstrated an ability to raise fresh capital from the market should in principle be able to repay government funds. But the judgment would be made in the context of the wider economic interest. He said the government had three basic tests. It needed first to "make sure the system is stable". Second, to not create "incentives for more deleveraging which would deepen the recession". Third, to make sure the system had enough capital to "provide credit to support the recovery". "
Obama Administration Considering Bank Nationalization (NYT)
The Administration is considering converting its shares to Common, which will in fact give the Administration a considerable interest in some of the largest financial institutions in the world.
"The Treasury has already negotiated this kind of conversion with Citigroup and has said it would consider doing the same with other banks, as needed. But now the administration seems convinced that this maneuver can be used to make up for any shortfall in capital that the big banks confront in the near term."
Goldman On Citi (Bloomberg)
Goldman's calling bullshit on Citi's numbers, saying the 1.6B in net income gain actually sat on an underlying loss of 38 cents, not the 18 previously reported. The analyst (Richard Ramsden) repeated his sell rating.
"The results "included several one-time items which muddied the waters," Ramsden wrote in the note. "The key question mark in our mind remains what Citi's earnings power will be on the other side of the crisis.""

Banks Are Lending Less (WSJ)
Never mind that they shouldn't have been lending it in the first place, they aren't lending it now, damn it.
"The Treasury analyzed the monthly percentage change in the amount of new loans at each of the top 21 recipients of taxpayer funds. It then calculated the median change in lending at the 21 banks. (The median is the figure that falls directly in the middle of a string of numbers.) By that measure, the Treasury said, lending dropped 2.2% in February compared with the prior month.
Using the same raw data, the Journal's analysis focused on the total amount of new loans by the 21 banks, a more comprehensive measure. In February, that total fell 4.7% from January, more than double the government's estimate of the decline in the median. The Treasury hasn't released its own tally of the October to February decline."