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Message: More Big Losses for Big Banks
It looks like the world's biggest banks are sinking deeper into financial quicksand. The latest from Meredith Whitney, one of the few analysts with a decent track record, has indicated that Citigroup's latest fire sale plan shows almost zero promise.
Also shown below is the latest on HSBC, Europe's largest bank, which details how they undervalued their mortgage losses yesterday by about $30 billion.
Don't tell me Hank is wrong again on his latest call that the worst is over for the big banks.
Regards - VHF
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CITI IS BEYOND REPAIR
WHITNEY TRASHES PLAN
By KAJA WHITEHOUSE
May 13, 2008 -- Banking analyst Meredith Whitney blasted Citigroup's turnaround plan yesterday, saying the financial giant is so deep in a black hole that even renown physicist Stephen Hawking could not help the ailing company.
"We wish [Citi's] management team all the best in their ambitious endeavors, but we fear [it] is past the point of fixing," quipped the Oppenheimer analyst known for her forecast that the company would slash its dividend.
The biting remarks, in the form of a research note to clients, came on the heels of Citi's long-awaited turnaround plan, unveiled by the bank's executive team on Friday.
In a nearly four-hour presentation with investors and analysts, CEO Vikram Pandit said the bank aims to get rid of $400 billion in noncore assets but otherwise rejected calls to boost the stock by spinning off units.
Instead, Pandit outlined plans to further integrate the conglomerate by doing away with overlapping technology systems, among other changes.
Whitney gave Pandit's presentation two thumbs down, saying it was "glaringly light on actual mechanics," and "almost identical to one given by former CEO Chuck Prince about a year and a half ago."
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From The Times
May 13, 2008
Investor says HSBC undervalued loss by $30bn
Christine Seib
Knight Vinke, the activist investor, launched a fresh attack on HSBC yesterday, accusing Europe's biggest bank of flattering its US sub-prime losses by failing to write down $30 billion (£15 billion) worth of mortgage assets.
The broadside came as HSBC revealed a $3.2 billion first-quarter writedown on loans by its US business to poor Americans.
HSBC's investment bank also took a $2.6 billion writedown on credit investments for the first three months, pushing the group's total losses on sub-prime to $25 billion.
The bank was bearish on the outlook for the United States, predicting a recession as increasing numbers of Americans defaulted on home and personal loans in the first quarter. HSBC, a big lender in America through HSBC Finance Corporation (HFC), said that US house prices would continue to fall into 2009.
Michael Geoghegan, HSBC's chief executive, refused to call the end of loan impairments. “I would say we're in a lull at the moment. The growth in impairments has slowed a little, but that may well be seasonal . . . I can't say if it'll go up or if it'll go down,” he said.
Knight Vinke said that HSBC should have been gloomier about its own prospects. The fund manager, which has been agitating for HSBC to sell HFC, said that the group was the only large bank not to make a fair value adjustment on its loans to customers and other banks.
If HSBC accounted for the loans at their market value, they would be worth almost $30 billion less than $1,218 billion book value that the bank ascribes them, Knight Vinke said. Of that loss, about $23 billion comes from HFC. Taking the writedown would have pushed HSBC into a $5 billion loss last year instead of a $24 billion pre-tax profit, the fund manager said.
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