Archive for April, 2009
The intended message out of the Treasury Department is clear: Troubled Asset Relief Program (TARP) funds may be dwindling, but the program is working. The Treasury this week released details of another brief round of capital investments, as well as a monthly lending report that highlights the growing mortgage business among the 21 top TARP recipients.
The Treasury said Wednesday it invested another $23m in financial institutions through the Capital Purchase Program (CPP). According to Treasury reports, two transactions occurred Thursday through the new Automotive Supplier Support Program. The Treasury granted GM Supplier Receivables LLC a loan worth up to $3.5bn; it also gave Chrysler Receivables SPV LLC a loan worth up to $1.5bn.
The CPP injections — made Friday — showed the continued slowing of TARP funds since the previous week, from $54.8m on April 3 to $22.8m on April 10. Daily capital investments have slowed at a fairly steady pace since the March 13 infusion of $1.46 billion in 19 institutions. CPP investments slowed to $80.75 million on March 20 and ticked up to $192.96 million on March 27 before plunging to $54.83 million on April 3. The decline in daily volume indicates the Treasury may be reigning in its daily spending of TARP funds in order to reserve remaining capital at its disposal.
Five privately held institutions participated Friday. The largest injection — $9.4m — went to Newark, N.J.-based City National Bancshares Corp., while the smallest daily injection — $2.04m — went to Chicago, Ill.-based Metropolitan Capital Bancorp Inc.
According to the latest TARP transaction report, another firm joined the five financial institutions that repaid a combined $353m on March 31. Vineland, N.J.-based Sun Bancorp Inc. (SNBC: 3.05 +2.35%) on April 8 repurchased the $89.31m in stocks from the Treasury. Easton, Md.-based Shore Bancshares Inc. (SHBI: 5.52 -0.36%) on Wednesday also completed the repayment of its TARP funds by repurchasing $25m in shares sold to the Treasury on January 9, according to a press release. All told, the seven firms repaid a total $467.31m to the Treasury.
See the latest TARP transaction report.
Capital injections overall may have slowed, but lending among the top 21 TARP recipients remained relatively strong in February, Treasury reported Wednesday. Mortgage lending, in particular, continued to grow since January, showing an increasing gap between the volume of purchase money mortgages and refinance volume as mortgage rates linger at historic lows and homeowners attempt to lower monthly payments.
"Within this challenging environment, the February survey shows that banks extended only a slightly smaller total volume of loan originations in February than January," Treasury officials said in the press release. The 21 top banks posted a median 2% slip in total lending, with nine banks posting increases in lending growth and 12 reporting declines, Treasury said.
The Treasury's monthly report found Bank of America Corp. (BAC: 7.29 -0.14%) funded $28.7bn in mortgage originations in February, up from $22.8bn in January. Refinances accounted for almost 78% of BofA's February mortgage originations, with new home purchases made up the remaining $6.4bn. In January, the bank's refi share of mortgage originations was 72%. JP Morgan Chase & Co. (JPM: 37.21 -0.75%) funded $13bn in mortgage originations in February, up from $9.6bn in January; refis made up 84% of the business last month, up from 72% of Chase's January mortgage business. Wells Fargo & Co. (WFC: 29.60 +1.89%) posted $34.8bn in mortgage originations in February, up from $24bn in January. Refis accounted for 82% of Wells' mortgage business in February, from 70% in January, according to the Treasury's report.
Write to Diana Golobay at diana.golobay@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
The U.S. Treasury Dept. said Wedensday evening that it had completed arrangements with the first six major mortgage servicers to participate in a much-publicized program announced by the Obama administration to modify three to four million mortgages. The program, part of the Homeowners Affordability and Stability Plan detailed in March, will provide the selected servicers with a combined maximum of $9.9bn to modify troubled mortgages.
The department said the following servicers were the first to become eligible for payments under the Making Home Affordable loan modification program: Chase Home Finance LLC, Wells Fargo Bank NA, CitiMortgage Inc., GMAC Mortgage Inc., Saxon Mortgage Services Inc. and Select Portfolio Servicing.
The payments are part of the administration's $75 billion program to try to prevent foreclosures and help borrowers refinance into new loans. Other servicers will be added as arrangements are finalized, the Treasury said; and it's clear that the list of servicers looking to obtain incentive payments is quite long.
For example, West Palm Beach, Fla.-based Ocwen Financial Corp (OFC: 24.05 +1.39%), a subprime servicer not on the initial list of six released by Treasury officials, had said earlier this week it believed it was the first servicer in the country to begin executing loan modifications under the administration's plan.
Also not on the initial Treasury list was Bank of America Corp. (BAC: 7.29 -0.14%), the nation's largest servicer after its acquisition of Countrywide Financial last year. A request for comment on BofA's implementation of the loan modification guidelines set forth in the HASP had not been returned by the time this story was published.
It's unclear if servicers modifying mortgages to government-specified guidelines ahead of a final agreement with Treasury officials will be able to obtain incentive payments for mortgages they modify during the interim timeframe.
Among the first six to obtain funding from the Treasury, Chase could receive the lion's share of incentive payments, up to $3.6 billion. Wells Fargo has been allotted $2.87 billion, and CitiMortgage $2.07 billion; GMAC could get $633 million, Saxon $407 million and Select Portfolio $376 million. All figures are based on the size of each company's respective servicing portfolios, a senior Treasury official told the Wall Street Journal.
Under the plan, the government will pay servicers a $1,000 one-time fee for modifying a mortgage down to a 38% payment-to-income ratio for five years — a plan that analysts, including Amhert Securities analyst Laurie Goodman, say creates an incentive for homeowners to 'rent' their home. Modified loans must survive a 90-day trial in order to be eligible for the incentive payment.
Government funds will also match the cost of further interest-rate reductions or other modifications to bring payments down to 31% of a borrower's income. If borrowers perform in their newly-modified mortgages, servicers would be eligible to receive $1,000 per year for three years under the government incentive program.
Write to Paul Jackson at paul.jackson@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.
The Department of Banking and Finance in Georgia recently ordered Lighthouse Services to cease and desist from operating in the state’s mortgage industry. The department was right to do so, as the Orange County, CA-based business is unlicensed.
The problem is that the unrelated legitimate Orange County mortgage firm, Lighthouse Real Estate Solutions (LRES), is now caught up in a case of mistaken identity. Since the cease and desist on Lighthouse Services, aka US Foreclosure Relief Corporation, was engaged on March 5, the law-abiding LRES reports numerous inquires from clients into their business practices in the state of Georgia.
“It is not unusual to see name similarities with companies, especially in the mortgage field,” says Rod Carnes, the deputy commissioner for the non-depository financial institutions division in Georgia who issued the cease and desist on behalf the state’s Department of Banking and Finance. “[This case] not unusual as ‘Lighthouse’ is used by many entities in the state, however LRES is licensed, whereas US Foreclosure Relief Corporation, dba Lighthouse Services, would take around $3,000 up front with the promise to aid already struggling homeowners.”
“They would take that money and do nothing, not even a loan modification,” Carnes said.
Roger Beane, CEO of LRES strongly reiterates to clients that the company, U. S. Foreclosure Relief Corporation, dba Lighthouse Services and LRES are not affiliated in any manner. “LRES Corp. has been assisting the mortgage and financial industries with mortgage default services since 2001. Our clients are loan servicers and other financial institutions and our business model does not include the solicitation of fees from homeowners nor do we offer financing or other mortgage brokerage services of any kind” says Beane.
Carnes added that a search of the state’s website: www.gadbf.org would have revealed to borrowers that LRES “has gone through the proper steps” to do business in Georgia, whereas Lighthouse Services would not have been listed.
That has changed, of course, now that Lighthouse Services is under administrative action in the state of Georgia.
Write to Jacob Gaffney at jacob.gaffney@housingwire.com.
After reports circulated late last week that Federal Reserve officials gagged various U.S. banks regarding stress test results, the Obama administration is discussing whether to reveal some details about the test results. As a result, certain information about the condition of the top 19 U.S. banks may soon be publicly disclosed, unnamed sources told the New York Times.
The Fed told Goldman Sachs Group Inc. (GS: 111.77 +2.96%), Citigroup Inc. (C: 30.87 +1.61%) and other major banks not to talk about the results — or even the process — tied to ongoing stress tests at U.S. banks, Bloomberg News reported Friday. Federal examiners continue to crunch numbers at key U.S. banks to determine the ability of each to withstand a lengthy U.S. recession, and investors anxiously await the results. The gag orders on the eve of banks' earnings season indicate reluctance on the part of regulators to fuel speculation. Banks perceived as weak due to stress test results may further corrode an already cautious investor base.
White House press secretary Robert Gibbs said the government plans to release all stress test results by early May, according to Bloomberg News.
Early projections and earnings statements paint a rosy picture of at least some recovery in the U.S. banking sector. Goldman on Monday posted net earnings of $1.81bn — or $3.39 per share — for Q109, up considerably from the $4.97 per share net loss reported in Q408. Strong mortgage performance drove the gain, according to Goldman’s earnings statement. Wells Fargo & Co. (WFC: 29.60 +1.89%) said last week it expects to post a record net income of $3bn — or 55 cents per share — in its Q109 earnings statement, which is slated for an April 22 release. The expected gain would come after accounting for $372m in dividends paid to the Treasury on its TARP capital investment.
JP Morgan Chase & Co. (JPM: 37.21 -0.75%) is slated to release its Q109 earnings Thursday, while Citigroup plans to release its Q109 earnings before market open Friday.
Write to Diana Golobay at diana.golobay@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
Industry veteran Richard Cimino will join iServe Servicing, a subsidiary of National Asset Direct, Inc., as chief executive officer, according to an announcement made by the company this morning.
Cimino brings with him over 33 years experience in the consumer finance, real estate and mortgage banking industry with such companies as New Century, Ford Consumer Finance, C.F.R. and Aspen Financial, iServe said in a press statement.
Cimino most recently served as President of the Servicing Division for New Century Mortgage, a position he held for five years. During his tenure at New Century, Cimino launched a full-service servicing platform reaching approximately 240,000 loans. In addition, Cimino oversaw more than 650 employees in the Santa Ana, California and Fishers, Indiana locations.
"His deep experience in the industry, knowledge of what we do at iServe, and unique vision of the future of the market makes Richard a great addition," says Jeffrey Kaplan, NAD's president and CEO. "He is exactly the type of senior person we want at the helm, guiding iServe and growing it through this difficult but potentially rewarding time."
Louis Amaya, NAD's chief investment and operations officer says Richard will draw on his background and relationships to further grow the company's business in new markets, effectively managing risk, and positively communicate the companies endeavors to key players.
"I am very impressed by the impact that iServe has had since they've begun," says Cimino. "The firm is only two years old, and already they have made a name for themselves as a risk-taking, flexible, exciting young firm. I look forward to helping iServe navigate this current market and capitalize on new opportunities."
ResCap Hires
Residential Capital LLC, the mortgage lending unit of GMAC LLC, plans to boost its workforce by 100 to 150 people at its Fort Washington, Pa. location, said spokeswoman Jeannine Bruin this morning.
Bruin told the press an increased demand for refinancing is driving the need for additional staff. On the heels of record low mortgage rates, borrowers are increasingly refinancing. Last week, according to Freddie Mac's Primary Mortgage Market Survey, 30-year fixed-rate mortgages averaged just 4.87%, while application volume rose 13.3%, according to the Mortgage Bankers Assocation.
Bloomington, Minn.-based ResCap, which slashed 5,000 jobs in 2008, will hold a job fair Thursday and another on May 7 at its office in Fort Washington. Bruin said the majority of hires will be in loan-origination operations.
Write to Kelly Curran at kelly.curran@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade
The National Low Income Housing Coalition (NLIHC) is sounding a warning on rising jobless rates as a deflating housing bubble may be pushing many homeowners out of "previously affordable homes" and into a recently competitive rental market where pickings are slim and increasingly unaffordable.
The NLIHC bases this claim on the fact that the average median hourly wage for U.S. workers, $16.03, falls short of the $17.84 hourly "housing wage" needed by full-time workers to afford standard two-bedroom rental housing at the nation's average fair market rent (FMR), according to the coalition's newly released annual "Out of Reach" report.
Households with wages near the federal minimum wage of $6.55 per hour must work a combined 109 weekly hours to afford the national FMR. On a localized level, in no U.S. county can a full-time minimum wage worker afford a one-bedroom apartment at the local FMR, according to the report.
"The statistics in Out of Reach show the disconnect between what it costs to afford decent rental housing in the U.S. and what low-wage employment actually pays," researchers wrote in a press statement on the report, "with more families turning to the rental market and job losses numbering in the millions, the struggle to find affordable housing has become even more acute."
The volume of renting households expanded by 2.2m during the last two years, while the volume of home owning households contracted. The unemployment rate jumped to 8.1% during the last 12 months from 4.8%, and holds at 12.6% for the segment of the population without a high school degree, according to the report.
An estimated 70% of renting households with "extremely low income" spent more than half of their income on rent, even before the current crisis. This segment of the population faces a shortage of 2.8m affordable units, with only 38 affordable units available for every 100 households before the start of the crisis, the report found. As of the current crisis, 40% of foreclosures displace renting households, increasing the pressure on available units.
"The unemployment and foreclosure crisis have only exacerbated the difficulties that low income households have historically encountered in their search for decent, affordable rental housing," NLIHC researchers said in the report.
Write to Diana Golobay at diana.golobay@housingwire.com.
Following a surge in California's foreclosure activity in February, Notices of Default and Notices of Trustee sale continue to soar in March, reaching record and near-record levels, respectively, according to today's ForeclosureRadar's California Foreclosure Report.
Notices of default in March increased 29.3% over February, to 54,268 filings, while notices of Trustee sale — which set an auction date and time — rose 82.3% to 33,178 filings. Sales at auction, however, plunged 41.4% in California, reaching the lowest levels seen since the third quarter of 2007.
Third parties bought 10.7%, or 1,073 properties of those properties taken to auction. While banks still take back the majority of foreclosures at trustee sale, ForeclosureRadar said third party bidding has continually increased since January 2008. The report also found lender discounts at auction increased substantially from February to March, reaching an average of 44.1%. The largest discounts were seen in Monterey County with an average discount of 56.1%, while San Mateo County was among the lowest at 20.7%
"While there is a lag between foreclosure filings and foreclosure sales, these dramatic differences are likely best explained by the unintended consequences of government intervention in the foreclosure process," reads the report.
Sean O'Toole, founder and CEO of ForeclosureRadar says the government's programs aimed at addressing the foreclosure problem don't deal with the core issue of negative equity. "[T]he only tangible effect of these programs so far is a significant increase in uncertainty for homeowners, lenders, investors and even government officials trying to make sense of these wild swings in activity," he said.
Government officials say, however, the Treasury's "Making Home Affordable" program, alone, could positively effect 7 to 9m homeowners, allowing them to refinance into lower mortgage rates and avoid foreclosure. Obama said last week he's seen "extraordinary jumps" in refinance activity across the nation.
A "Swing" on the Horizon?
Some of the nation's largest mortgage companies are stepping up foreclosures on delinquent homeowners, according to a report by the Wall Street Journal Wednesday — which could send foreclosure activity rampant. J.P. Morgan Chase & Co., Wells Fargo & Co., Fannie Mae and Freddie Mac told the WSJ they have increased foreclosure activity in recent weeks and lifted internal moratoriums which have temporarily halted foreclosures in the recent past.
Over the past couple months, as the Obama administration worked to hash out details of its housing-rescue plan, many mortgage companies have temporarily halted foreclosures. "We had stopped putting additional loans into the foreclosure process so we could be sure that delinquent borrowers would have every opportunity to take advantage of new initiatives that we were putting in place," a Chase spokesman told the WSJ.
Now, the companies have started to sift through troubled borrowers, determining which candidates are eligible for help. The result, according to findings by the WSJ, will be an increased volume of foreclosed homes — which, if the homes are pushed through the entire process, have the potential to boost foreclosure sales — which dipped drastically in March.
Write to Kelly Curran at kelly.curran@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade
The headline to this column is a question you'll increasingly see in the press over the next few months as foreclosures begin to filter their way through the default pipeline all over again. But don't take my word for it — the Wall Street Journal discovered today that foreclosures are back on the upswing, so it must be true.
If you'll recall, servicers nationwide had implemented a series of foreclosure moratoria that largely ran through the end of March. Many servicers — that would be JP Morgan Chase & Co. (JPM: 37.21 -0.75%), Wells Fargo & Co. (WFC: 29.60 +1.89%), and the like — had implemented a foreclosure and extended eviction halt at the instruction of the GSEs, whose loans they manage; they also had agreed to halt foreclosures for certain borrowers while the details of Obama's Making Home Affordable program were being implemented and put into place.
The moratoria helped slow actual foreclosure sales the past few months, while the number of foreclosure starts (the start of the default process) have continued to pile up.
Fixed-income researchers at Bank of America Corp. (BAC: 7.29 -0.14%) on Wednesday noted that 90+ day roll rates, which measure the relative number of severely delinquent loans moving to foreclosure sale, have largely been suppressed by the foreclosure freezes. "Although the overall trend and levels for the prime, alt-A and subprime sectors have differed, on average, the [90+ days roll to foreclosure rate] dropped almost 10 percentage points, from around 25% per month to about 15% per month," the researchers said in a note to clients. They expect to see a spike in foreclosure sales, however, over the next 1 to 3 months "as the moratoriums are lifted and loss-mitigation programs start to filter out ineligible borrowers."
So we're seeing a borrower backlog in the default pipeline. Are these borrowers exiting the pipeline via other means, since foreclosure hasn't been a viable option recently? The data again suggests the answer is a resounding 'no.' While cure rates have been increasing in comparative terms over the course of the moratoria duration (essentially Dec. 2008 to Mar. 2009), in real terms cures remain tough to come by. According to data from Clayton Holdings, Inc., for example, the cure rate on 2007 vintage subprime first-lien RMBS in February rose 11.1% from January levels, but was still 8.16%; for 2007 vintage Alt-A first lien RMBS, the cure rate in February was up 3.73% month-over-month, but still at just 4.69%.
What we are seeing, however, is servicers quickly moving to clear bad assets as soon as the GSEs and government pressure points will allow foreclosures to proceed. Analyst Mark Hanson of The Field Check Group circulated data to subscribers last week showing that for California, among the state's top five servicers, the volume of notices of sale surged more than 170 percent between February and March 2009 alone, from 4,410 NTS filings in February to 11,981 in March. (Notices of sale indicate an imminent foreclosure, usually within a 30 to 60 day timeframe, depending on locale.)
Which means that the financial press, consumer groups, and Capitol Hill are quickly coming to realize something that most of us from the mortgage space have long known to be true: the problem here isn't entirely the mortgage instrument, and moratoria ultimately can do nothing more for most troubled borrowers than postpone the inevitable. From the Journal, an exercise in finding reality:
"We are getting so many of these cases where people don't fit the new [Obama] program," says Michael Thompson, director of Iowa Mediation Service, which works with troubled borrowers. Many borrowers are unemployed or underemployed or have credit problems that go well beyond their mortgage troubles, he says.
Many have been "playing for time" while the moratoriums have been in place, he says. But the delays have only increased the amount of interest and fees they owe, making their loans "nonviable in the long run."
This should not be considered news to anyone inside the mortgage banking space, or anyone that reads HousingWire. As we've written about numerous times in this space, no amount of modification can replace a lost job, or a long-term loss of income. And with 15.6% of the nation's workforce now either unemployed or underemployed, the problems in the nation's mortgage markets are as much a broad economic problem as they're a problem tied to blow-and-go underwriting standards and creative loan products.
"The bottom line is that there is a massive wave of actual foreclosures that will hit beginning in April that can’t be stopped without a national moratorium," Field Check's Hanson wrote in a note to clients last week. Here's to hoping that we've already learned our lesson the first time around on this.
Write to Paul Jackson at paul.jackson@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments.
Raw mortgage application volume slipped 11% for the week ending April 10, according to a weekly survey released Wednesday by Mortgage Bankers Association (MBA). The four-week moving index for raw application volume rose 5.3%, indicating overall interest is still strong despite the weekly downturn. The Passover/Easter weekend "may have contributed" to the fall in application volume, as the MBA said it did not include any adjustment for the days consumers chose to observe the religious holiday over house hunting.
Refinance application volume fell 10.9% for the week, while the four-week moving average was up 6.5%. The refinance share of mortgage application activity fell slightly to 77.8 percent of total applications, from 77.9 percent the week before, according to the MBA’s data. The index measuring purchase application volume slipped 11.3%, with conventional purchase application volume down 13.5% and government purchase application volume — think FHA-insured loan applications, here — down 7.7% for the week, according to the MBA.
The indexes may have fallen from the previous week, but the declines were relatively even across the board, indicating that application interest fell in tandem across various products, from purchase to refinance applications. Application volume showed increasing strength since early March. The Federal Reserve’s mid-March announcement it would fund an additional $1.5 trillion to credit-unlocking efforts began pushing down mortgage rates and driving up applications.
After rising slightly last week, average mortgage rates fell again in the week ending April 10, suggesting some force other than affordability — which is largely affected by mortgage rates — drove down applications. The MBA found 30-year fixed mortgage rates slipped to an average 4.7% this week from 4.73% a week earlier, while 15-year fixed mortgage rates fell to an average 4.46% from 4.49% the week before.
A separate survey conducted by Mortgage Maxx LLC found that application activity adjusted for multiple applications from a single household fell 7.5% for the same week ending April 10. Household activity in California alone slipped 14.7%, the study found. The Mortgage Application Index — or MAX — publisher Paul Descloux, in his weekly commentary on the index, said the weekly decline bore no "[sic] discernable impact" from Good Friday and showed a continuing trend of .
“Leading mortgage applications take a breather despite widely publicized sub-five percent mortgages" this week, Descloux wrote. He reiterated a point his commentary repeatedly brings up; the fees and "expenses associated with monthly mortgage savings" through the refinance process may make less and less sense to cash-strapped borrowers.
Visit www.mbaa.org and www.mortgagemaxx.us for further details.
Write to Diana Golobay at diana.golobay@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
UBS (UBS: 14.05 +0.50%) expects to post a loss of almost $1.75bn (CHF 2bn) in Q109 and to cut its head count by approximately 11%, according to early reports released Wednesday. The exact source of these losses are elusive, yet contribute to the darkening banking market across the pond.
"The loss stems from a negative contribution totaling roughly CHF 3.9bn due to losses on previously disclosed illiquid risk positions, credit loss expenses and valuation adjustments on the last positions transferred to a fund controlled by the Swiss National Bank," UBS officials said in a media release.
Early reports out of UBS clearly stated, however, expected losses are heavy and cutbacks are inevitable. "UBS seeks to realize substantial cost savings in all areas," company officials said. "Major job cuts are unfortunately unavoidable." The company said it plans to cut its employee count by 11.4%, from 76,200 as of March 2009 to about 67,500 in 2010. UBS, which employs people in more than 50 countries worldwide, said "some of these job cuts will be in Switzerland." A UBS spokesperson could not comment on the geographic breakdown of the job cuts at the time this story was published.
"We know where we have to set to work," said UBS Group CEO Oswald Grübel. "It will be a long road back to success without any quick fixes. Rather, we will move forward step by step in a rigorous and disciplined manner."
Grübel is no stranger to the Swiss banking system, where recent market turmoil is dictating large amounts of personnel shifting. Grübel had officially retired from his position at Credit Suisse Group in '07 after serving four years in executive positions. "My time as [CEO] has been very satisfying with the transformation of Credit Suisse into a global integrated bank under a single brand," he said in a statement dated Feb. 15, 2007.
UBS persuaded Grübel back into the market two years later after former CEO Marcel Rohner resigned. UBS chairman Peter Kurer in a February '09 press statement said "Grübel brings the ideal skill set to recreate value, together with our management team, for our shareholders and clients. He will also be adept in balancing our focus on prudent risk taking and client confidence, and our goal to position UBS for future success.”
The hefty quarterly loss expected, combined with the substantial head count reduction coming in the next months would suggest Grübel has not been able to stem the tide of red ink out of UBS.
The news comes in stark contrast to the rosier earnings projections by U.S. banks that received capital aid from the Treasury Department through the Troubled Asset Relief Program. Goldman Sachs Group (GS: 111.77 +2.96%) on Monday posted net earnings of $1.81bn — or $3.39 per share — for Q109, up considerably from the $4.97 per share net loss reported in Q408. Strong mortgage performance drove the gain, according to Goldman's earnings statement. Wells Fargo & Co. (WFC: 29.60 +1.89%) said last week it expects to post a record net income of $3 bn — or 55 cents per share — in its Q109 earnings statement, which is due out April 22. The expected gain would come after accounting for $372 million in dividends paid to the Treasury on its TARP capital investment.
Foreign banks operating in U.S., however, see little of the TARP's relief, an issue not isolated to the Swiss banking sector. British banks in particular have seen stocks slip in response to the global banking woes. Barclays PLC turned down government funding through the Special Liquidity Scheme (SLS) — sort of the British version of TARP — and instead opted for a rights issuance, indicating the bank's strength outside of government aid. Standard Chartered Bank's minimal presence in the news creates the same effect, as does Lloyd's Banking Group's recent nationalization by the British government.
Although these major British banks may appear stable, all three saw their stocks dip on news of UBS' announcement, indicating British banks are not immune to the plagues of the European banking sector. UBS' expected losses — and the response of the British banks' stocks — paint a very worrying picture of the European banking sector as a whole, despite numerous government attempts to bolster liquidity.
Write to Diana Golobay at diana.golobay@housingwire.com.
Disclosure: The author held no relevant investment positions when this story was published. Indirect holdings may exist via mutual fund investments. HW reporters and writers follow a strict disclosure policy, the first in the mortgage trade.
