The uncertainty that has surrounded Greece this year, and the extent of contagion due to any failure had dragged stocks down and depressed overall investor confidence. Today though, stocks opened higher and surged throughout the day on the good news. Financial stocks saw particularly large gains as a result, with Citigroup (NYSE: C), JP Morgan Chase (NYSE: JPM), Bank of America (NYSE: BAC), and Goldman Sachs Group Inc. (NYSE: GS) all posting large increases for the days. As investors speculated these firms had the most direct exposure to the Greek credit crisis, a resolution to that crisis should help buoy prices. Many of the banks continue to inexplicably trade below book value, leaving large appreciation potential in the near and long term.

Although not a typical financial company, Visa (NYSE: V) reported earnings today that were slightly above expectations, further pushing gains higher. Visa is a unique financial intermediary as they do not take on trading risk; instead, their business model is based on getting paid a percentage of reach transaction every time someone uses their credit or debit card. Taking into account the gradual move from cash only to a primarily electronic transaction economy, Visa has plenty of room to grow, and this is reflected in its price, which is hovering near all-time highs.

Exxon Mobil (NYSE: XOM) also reported earnings today, posting impressive results. The oil giant reported a 41% increase in earnings, in line with Wall Street’s expectations, and posting modest gains afterwards. Exxon Mobil remains the U.S. firm with largest market capitalization, close to $400 billion.

The debt crisis is not over year, as Spain, Italy, and Portugal remain on shaky ground, but some good news has been latched onto quickly. The lift generated by the debt restructuring news should continue to have positive effects, as European and Asia markets are likely to build a rally of their own when they open tonight and early tomorrow morning. The spillover effect may fuel additional rallies in the U.S. tomorrow, though profit taking is always a possibility as well following a quick run up.

Citigroup (NYSE: C), JP Morgan Chase (NYSE: JPM), Bank of America (NYSE: BAC), and Goldman Sachs Group Inc. (NYSE: GS) Post Gains Following European Debt Deal is a post from: Localized USA: Your Local News Source

John Stumpf, chairman, president and CEO of Wells Fargo commented “With our neighbors across the country suffering during this prolonged economic downturn, the generosity of our team members continues to be a point of pride for Wells Fargo. Year after year, they respond with empathy and leadership by donating their time and money to make a difference in people’s lives.  Our team members’ deep commitment to their communities explains why Wells Fargo, the nation’s 12th largest employer, has been United Way’s No. 1 largest corporate campaign over the past two years.”

In addition to the cash donations, the one-month campaign also resulted in 122,000 volunteer hours contributed by team members to a variety of nonprofits and other causes in local communities across the country.

During this year, 4,700 team members in Charlotte, set a national record for corporate participation in an American Heart Association fundraising walk, raising more than $375,000 to help the American Heart Association fight heart disease.  In the Greater Bay and San Francisco Bay area, 4,500 team members volunteered 13,325 hours on 280 different projects during the month of September, including the San Francisco Public Library and “habitat restoration” on Alcatraz.  In the Twin Cities, 1,000 team members volunteered with Feed My Starving Children to prepare and package 91,917 nutritious meals for needy children in countries around the world and raised $22,000 to help pay for the ingredients and shipping expenses.

Brian Gallagher, president and CEO of United Way Worldwide commented that “United Way could not make the impact that it does without important, longstanding partners like Wells Fargo. Congratulations for running this year’s top campaign. Wells Fargo and its employees continue to demonstrate their commitment to advancing the common good. Through their tremendous generosity and focus on volunteerism they’re improving lives and strengthening communities throughout the country.”

Wells Fargo team members invest in nonprofits throughout the year. To- date, including the Campaign, team members have donated $63.9 million of their own dollars to nonprofits, a 15 percent increase over 2010, and the ninth straight year of year-over-year double-digit increases in pledge totals. The firm also matches contributions up to $5,000 per employee, further emboldening the contribution efforts.

Wells Fargo (NYSE: WFC) Employees Giving Record Time and Money Donations to Charities is a post from: Localized USA: Your Local News Source

Today, the firm announced it has opened a customer assistance center in Warwick to serve its mortgage customers throughout Rhode Island. Borrowers will have the opportunity to meet face-to-face with Bank of America home retention specialists to review options for home loan modifications or other alternatives to foreclosure, as well as review loan modification files already in progress. The announcement comes after the firm held a customer outreach event in Providence from July 7-9, which helped 400 attendees meet face-to-face with home retention specialists to review options for modifications or assist with other alternatives to foreclosure.

Foreclosures continue to plague the housing market, and loan re-structuring is seen as a key tool needed to help stem the tide. Rebecca Mairone, national mortgage outreach executive for Bank of America Home Loans commented “Face-to-face dialogue is an incredibly important element of homeowner assistance, which is why we have established a permanent presence for our Rhode Island customers. Home retention specialists in Warwick will play a critical role as we seek to build on the more than 3,800 permanent loan modifications we have completed statewide since 2008.”

The Warwick customer assistance center team will follow each customer file through the entire loan modification process, make on-site decisions in many cases, and assist with other available foreclosure prevention solutions if a modification is not possible. The team will also assist Spanish-speaking customers by offering bilingual staff. Bank of America customers can make appointments and get more information on required documentation by calling the center at 401.535.1061. Home retention specialists are available to meet with borrowers by appointment only from 9 a.m. to 6 p.m. on weekdays and 9 a.m. to 1 p.m. on Saturdays.

Although the firm has continued to receive significant negative press, the firm has shown a clear commitment to the communities they operate in. Since the first of the year, Bank of America has expanded its network of customer assistance centers for mortgage customers from five to nearly 50. More than 42,000 homeowners have received assistance through these centers.

Bank of America (NYSE: BAC) Opens Customer Outreach Center In Rhode Island is a post from: Localized USA: Your Local News Source

According to a memo obtained by Bloomberg News, Buckley T. Ratchford, who served as the head of global bank loan trading and distressed investing at Goldman, has resigned from the firm. Ratchford, 40, a partner and managing director, will leave at the end of this year. Michael DuVally, a spokesman for the New York based bank, confirmed the memo’s contents and declined to comment further. Blake Mather, Ratchford’s partner in running bank loan sales is also leaving the firm. During the conference call with analysts announcing the third quarter’s results, Goldman’s CFO David Viniar commented that trading in the credit department, which includes bonds and loans was ‘challenging’ during the quarter.

Ratchford joined Goldman Sachs in 1998 and became head of global bank loan distressed investing in 2003. Revenue from fixed-income, currencies and commodities dropped 36 percent to $1.73 billion from $2.69 billion a year earlier. The bank said in July that it planned to cut about 1,000 jobs to help reduce annual costs by $1.2 billion. Cost cutting will help Goldman on margin, but the underlying issue is trading revenue, not the expenses. The fall in revenue has put the firm in unchartered waters for them, dealing with quarterly losses and taking the wrong side of many trades.

This is not the first time Ratchford has been in the news, back in December he was featured on Comedy Central’s ‘The Colbert Report’ after one of the show’s writers found his credit card on the street. Colbert joked at the time that he would reveal one digit of the credit card each night until Ratchford came on the show to defend Wall Street bonuses. Goldman Sachs shortly thereafter contacted the comedian to request the card be returned, which he complied with and ended the plan. The success, or lack thereof, of the global distressed bank loan trading department is no joking matter, however. The department’s results have detrimentally impacted the firm overall, and perhaps a change at the top is needed to get the group turned around.

The department head’s successor has not yet been publicly announced.

Goldman Sachs (NYSE: GS) Exec Ratchford Departing Amidst Quarterly Loss is a post from: Localized USA: Your Local News Source

Gupta was charged with one count of conspiracy to commit securities fraud and five counts of fraud. He faces five years in prison on the conspiracy charge and 20 years on each of the securities fraud charges. He also faces fines of more than $5 million. Although he is released on bond, U.S. District Judge Jed Rakoff ordered him to surrender his passport. While the government probe has been going on for four years, Gupta, 62, is the highest ranking executive to be named in the investigation.

The arrest and charges sound eerily similar to former Galleon Group founder Raj Rajaratnam, who earlier this month was sentence to 11 years in prison for his role in insider trading.

Gary Naftalis, Gupta’s attorney commented that “The facts demonstrate that Mr. Gupta is an innocent man and that he has always acted with honesty and integrity. He did not trade in any securities, did not tip Mr. Rajaratnam so he could trade, and did not share in any profits as part of any quid pro quo. We are confident that any accusations that he did anything improper cannot withstand scrutiny by any fair and impartial factfinder.”

The complaint from the Securities and Exchange Commission (SEC) alleges that Gupta illegally tipped off Rajaratnam with inside information about the quarterly earnings of both Goldman Sachs and P&G as well as an impending $5 billion investment in Goldman by Berkshire at the height of the financial crisis.

Gupta stepped down from his post at Goldman in 2001, and left P&G’s board in March of this year. It has been a far fall for a person who once had a meteoric rise, graduating top of his class at the prestigious Indian Institute of Technology before moving on to Harvard Business School. After graduation and joining McKinsey, he quickly grew and in 1994 was appointed to lead the consulting firm. It has long been speculated that Gupta fed Rajaratnam inside information on the earnings of Goldman Sachs and Procter & Gamble, but the wire taps from Rajaratnam’s trial never specifically mention the name of the source, nor do they ever indicate Gupta. As such, the case against Gupta is largely circumstantial, but only the future can tell what will come of these charges.

Former Goldman Sachs (NYSE: GS) and Procter & Gamble (NYSE: PG) Director Pleads Not Guilty is a post from: Localized USA: Your Local News Source

Most recently, Deutsche Bank cut the third quarter earnings estimate for the Goldman Sachs Group Inc. (NYSE: GS). The move is predicated on weakness in lending, investment, and investment banking.  Since the second quarter ended, economic conditions have continued to deteriorate, and when coupling that with the news on Greece and the UBS (NYSE: UBS) rogue trader incident, the banking sector has been hit particularly hard. Although markets have rebounded relatively strongly this week, a large degree of uncertainty continues to exist and likely won’t stabilize any time soon.

Michael Carrier, an Analyst at Deutsche Bank said in a research note that “A more challenging economic backdrop, the euro zone’s sovereign-debt crisis, weakening economic data, and a significant decline in investment-banking activity from the second quarter are major drivers behind the expected weaker performance.” The bank expects Goldman to post a loss of 25 cents a share when it reports its third-quarter results next month, down from its previous forecast of a profit of 50 cents a share. The consensus view of Wall Street’s analysts are calling for a profit of $1.35 a share.

In recent research notes, it is evident Carrier is bearish on the banking industry, but the investment banks in particular. Third-quarter investment banking revenue for the brokerage industry is expected to drop about 40% quarter on quarter, with “pronounced weakness” in equity underwriting and debt underwriting and a significant decline in mergers and acquisitions.

Carrier commented that “With the stocks trading at discounts to tangible book value and expectations significantly lowered, we view these as priced in. Once we get some clarity around the Euro issues, we see meaningful upside.”

While the estimates from Deutsche Bank are below industry average estimates, time will tell their level of accuracy, and with just three weeks until the firms announce earnings that judgement will come quickly. Historically the profits of Goldman Sachs are particularly exposed to trading fluctuations, and following the disappointing results of last quarter it will be interesting to see if the firm chose to take on more risk this quarter, to try to save the 2011 profits.

Deutsche Bank Cuts Earnings Estimates for Goldman Sachs (NYSE: GS) is a post from: Localized USA: Your Local News Source

Bank of America (NYSE: BAC), the nation’s largest bank as measured by deposits, has announced plans that it will start charging a $5 monthly fee when customers make debit card purchases. The fee will be rolled out starting early next year. Prior to this year the idea of paying to use your own debit card was unheard of, but it may quickly become the norm. Several banks have recently introduced or started testing debit card fees.

The fee for these debit cards is in addition to the newly introduced account management fees rolled out last year.  Anna Pace, a spokeswoman for Bank of America commented that customers will only be charged the fee if they use their debit cards for purchases in any given month. Those who only use their cards at ATMs won’t have to pay.

The era of new fees is upon us, as reflected by a recent study carried out by Bankrate.com. The survey found that in 2009, 79 percent of checking account were free with no strings attached, compared to just 45 percent now.

Beginning in October, part of the new bank regulations will go into effect which limit the fees banks can charge merchants for debit card swipes. In 2009, those fees generated $19 billion in revenue for banks, according to a Nilson Report which tracks the payments industry.

If consumers choose to select ‘pay with credit’ when using their debit card, that can be even more advantageous for the banks. Bart Narter, a banking analyst with Celent, a consulting firm commented that “It’s become a more profitable business, at least in relation to debit cards.”

Several banks are considering a similar move, to charge for debit cards. SunTrust, JPMorgan Chase (NYSE: JPM), and Wells Fargo (NYSE: WFC) all have plans in the pipeline, meaning this will soon become an industry norm.

Bank of America (NYSE: BAC) Rolling Out New Debit Card Fees is a post from: Localized USA: Your Local News Source

Although the outlook is bleak in some of it’s lines of businesses, the Merrill Lynch division remains a crowned jewel. Acquired during the financial crisis of 2008, the thundering herd of financial advisors continues to post solid profits, even while management has spun the revolving doors since the acquisition.

The firm’s books are plagued with toxic mortgage assets, but that is only half the problem. They may need to raise capital to meet newly-stringent global liquidity standards, while it faces a wave of huge multi-billion-dollar lawsuits related to its poisonous dump of mortgage securities. While every bank struggles to deal with the new Dodd Frank financial regulatory reform, BofA will seem to have the most difficult path in light of the firm’s acquisitions. In the second quarter of 2011, the bank lost an astounding $8.8-billion, partially due to the burden of its enormous mortgage/legal liabilities.

Robert Lutts, President and Chief Investment Officer of Cabot Money Management in Salem, Massachusetts commented “Banks are now in an extremely challenging environment. Even banks like Wells Fargo and JP Morgan, which are better off than Bank of America on a relative basis, are still delivering pretty dismal numbers.” Lutts went on to describe Merrill as a “cash cow” that Bank of America would be foolish to get rid of, and that “Merrill is their ‘golden goose’ which  generates major cash flow and is a proven franchise. Moreover, Merrill proved it could not survive as an independent entity. By separating Merrill, they would significantly weaken the entire company.” So, although Merrill could attract a significant cash inflow to the beleaguered Charlotte based bank, it may not be feasible to unload them given that their profits can help carry the losses being generated in the firm’s other divisions.

While Merrill Lynch remains a highly attractive and profitable institution and solid brand name, the other company Bank of America bought during the credit crisis, Countrywide Financial, is a disaster that threatens to implode the entire corporation. Many speculate that former Chief Executive Kenneth Lewis, did not fully comprehend the magnitude of Countrywide’s problems.

Bank of America shares are currently trading at about one-third of book value, while key competitors Wells Fargo (NYSE: WFC) and JP Morgan Chase (NYSE: JPM) are trading at 1.06 and 0.75 respectively.

Would Bank of America (NYSE: BAC) Consider Spinning Off Merrill Lynch? is a post from: Localized USA: Your Local News Source

During 2007 through 2009 BofA acquired the Countrywide business, the largest sub prime home mortgage originator in the nation, and Merrill Lynch, along with their thundering herd of financial advisors. The integration of these businesses, and the losses on mortgages that continue are posing serious jeopardy to the nation’s largest bank (as measured by deposits).

Recently, the firm announced plans to lay of 30,000 employees in the coming years. The firm’s official statement commented that the banks goal is “not a given number of job reductions, but to focus  all of its resources on serving individuals, companies, and institutional investors.” In total, these cuts are expected to save $5 billion in costs. Considering the mounting integration issues on ongoing legal fees, the cost cutting will be a necessary move to maintain profitability,

Coupled with these headcount cuts are a re-organization of the firm’s management team. the bank said it would now be run under the leadership of two chief operating officers, David Darnell and Tom Montag. It also said that Sallie Krawcheck, head of global wealth and investment management, and Joe Price, president of the consumer bank, are leaving the Charlotte based firm.

Paul Miller, managing director, FBR Capital Markets & Co., said “The real issue for the stock trading where it is today is that we don’t know about the bank’s business model and mortgage litigation expenses.” As the Countrywide division continues to garner significant losses and litigation, CEO Brian Moynihan recently left the door open to potentially splitting it off and filing for bankruptcy.  Miller commented that “If the bank got rid of Countrywide’s litigation expenses and liabilities, it could have a $10 to $12 stock price overnight. It’s not that we don’t like company — we have a hard time analyzing its balance sheet apart from all this litigation.”

But Miller added that he did not think bankrupting Countrywide would be politically and legally feasible.

While BofA did receive some positive press thanks to Warren Buffet, who announced plans last month to buy $5 billion worth of BofA shares, the stock price continues to trade down. The experiment in North Carolina may be nearing it’s conclusion, and eventually slide to the same fate Sandy Weill realized in his vision for Citigroup (NYSE: C). The supermarket model of banking may simply not work, and banks may need to get smaller, not larger to adapt to this changing environment.

Bank of America (NYSE: BAC) Exploring Options For Countrywide Division is a post from: Localized USA: Your Local News Source

Citigroup, formed through a series of mergers and acquisitions over the course of the last decade and a half has begun aggressively selling of businesses, and shrinking their activity in the financial services industry. Though still enormous, they are fast becoming a shell of their former selves.

Similarly, Bank of America, which rose to power through mergers with North Carolina National Bank, and acquisitions of Merrill Lynch and Countrywide also seems to be exploring options for getting smaller.

Gary Parr, vice chairman at Lazard (NYSE: LAZ) and one of the top advisers to financial companies observed during a panel discussion at Bloomberg Dealmakers Summit “Traditional bank A merging with bank B is nonexistent. It’s the rearranging of portfolios: what’s core, what’s non-core and so on that is very active. Extremely active.”

Citigroup and Bank of America have already sold several businesses each. Bank of America has sold several stakes in foreign institutions, and it recently sold its Canadian credit card business. Both companies continue paring down their portfolios, as do other large financial institutions, and Parr expects some of the buyers will be smaller U.S. players. Parr added “Some number of the buyers of these assets are going to be U.S. companies. The assets that are sold tend to be good businesses that are not so capital intensive,” he said, adding that “selling a big investment bank today is somewhere between really hard and impossible.”

From 1997 though 2008, many banks were trying to grow through a series of mergers and acquisitions, to grow market share, profits, and to diversify their streams of income. The supermarket model of financial services where all products are available under one roof seems to have come and gone very quickly now. To raise capital, many banks could find it appealing to sell non core businesses, while also transforming the firms into more nimble, easier to manage organizations. Due to the price of assets the size of deals may be on the smaller size in the near term, or firms may resort to spinning off non-core businesses into standalone firms through an IPO, should there be improvement in the primary market. Either way, we know one thing for certain: banks are showing a change in strategy.

Citigroup (NYSE: C) and Bank of America (NYSE: BAC) To Shrink? is a post from: Localized USA: Your Local News Source

The financial services industry continues to be plagued by mounting legal fees, as angry investors and customers see over the questionable practices of the past few years. The latest news comes on behalf of Citigroup (NYSE: C), which has been sued by the German lender IKB Deutsche Industriebank AG. The complaint lodged claims that Citi misrepresented documents as an underwriter in the sale of over $4.2 million in residential mortgage-backed securities.

Mortgage backed securities gained particular notoriety during the financial crisis of 2008, where there collapse risked bringing the entire financial system down with it. Home mortgages, sold to sub prime customers in many cases, were re-packaged into a single investment which was sold off to funds. When the underlying loans turned bad, the bonds defaulted and investors were left in a lurch.

According to Dusseldorf-based IKB, Citi issued misleading statements and omissions related to the mortgage-backed securities and breached the contract. IKB has filed lawsuit in the New York State Supreme Court in Manhattan. The company demands for unspecified damages and cancellation of the sale of securities.

The issue is system wide, with even exposure among the traditional investment banks. IKB also sued JPMorgan Chase & Co. (NYSE: JPM) earlier in September for the sale and breach of contract over the sale of mortgage-backed securities by misrepresenting documents. Bond insurer CIFG Assurance North America Inc. alleged that The Goldman Sachs Group Inc. (NYSE: GS) and its subsidiaries along with M&T Bank Corp. (NYSE: MTB) issued misleading statements and omissions related to the mortgage-backed securities from a portfolio of 6,204 loans, most of which were made by M&T Bank, which has concealed risks associated with the securities worth $275 million. The Allstate Corporation (NYSE: ALL), the largest insurer in the US of home and auto policies, also sued Goldman for misrepresenting documents in the sale of over $123 million in mortgage-backed securities from April 2006 to March 2007.

The ongoing lawsuits will likely continue to damage both the reputations and profits of the banks, as the contagion of bad loans continues to spread losses amongst the investor pools. The allegations of fraud and misrepresentations continue to be widespread, even now, three years after the apex of the collapse. The fundamental issue of investors not understanding the risk associated with their investments may ultimately have a shared responsibility, between the rating agencies who gave incorrect designations to the securities, to investors who should have applied more scrutiny to the deal documents, and to the banks how may have misunderstood or misrepresented the securities. In essence, it is a collective failure that will not be fixed any time soon.

Citigroup (NYSE: C) Sued by German Bank Over Mortgage-Backed Securities is a post from: Localized USA: Your Local News Source

Oswald Grubel, the banks Chief Executive Officer up to last week, resigned amidst the scandal. Sergio Ermotti, the former Chief Executive of the group’s operations in the Europe, Middle East, and Africa regions has stepped in and will serve as interim CEO of the firm. In recent weeks where the banking sector stocks have fallen precipitously, shares of UBS have lead the heard, as negative perceptions are magnified for the firm since the trading scandal.

Grübel, who was brought out of retirement as UBS Group CEO in February 2009 had also headed rival Credit Suisse from 2003 to 2007. Charged with the task of turning around the Swiss bank’s fortunes after huge losses during the global economic recession, he helped pull the bank’s performance out of the red in just six months. UBS Chairman Kaspar Villiger commented that Grübel had “achieved an impressive turnaround and strengthened UBS fundamentally.”

Nonetheless, the sheer size of the banks losses in the rogue trading scandal show a systemic failure within the firm, and someone had to pay the price. The timing comes as a challenge though, as there is exogenous uncertainty also placing pressure on the firm. Grubel’s departure comes at a time when banks in Europe and the US are facing difficult times amid political and macro uncertainty, which has resulted in substantial market volatility.

New CEO Ermotti will be tasked with improving the bank’s internal control systems, and concurrently seeing that the investment banking business is more aligned to the group’s strategy of increased client focus. The task will be long and arduous, and the firm could take many quarters to rebound financially. The extent of executives held accountable may not end with Grubel, as multiple reports have surfaced that investment-banking Chief Carsten Kengeter, Chief Risk Officer Maureen Miskovic and investment bank Chief Operating Officer Thomas Daula are all potential candidates to leave the firm as well. The firm was brought to the brink of collapse just three years ago amidst the financial crisis, and facing such serious financial issues today does not bode well for the firms short term performance. Recovering from such serious dents to profits and perception of the firm could be many years off.

Sergio Ermotti, Interim CEO at UBS (NYSE: UBS) Has Tough Task Ahead is a post from: Localized USA: Your Local News Source