Latest news from citigroup was to be take over wachovia for $2.2 billion.
Quote: As part of all-stock deal, Citi will acquire deposits, loans from nation's fourth largest bank. Citi also to raise $10B in stock sale, cuts dividend.
link: http://money.cnn.com/2008/09/29/news/companies/wachovia_citigroup/index.htm?postversion=2008092910
2 other news that occurred for european banks:
Fortis has been suspected as going to be bankrupted and has been bailed out by a few nations.
Quote: European financial giant Fortis partially nationalized. Three governments to pour 11.2 billion euro ($16.4 billion) into the bank.
Link: http://money.cnn.com/2008/09/28/news/international/fortis_nationalized.ap/index.htm?postversion=2008092818
In Britain, Bradford & Bingley is another victim.
Quote: In Britain, the government nationalized its second bank this year, taking over Bradford & Bingley's £50 billion ($91 billion) mortgage and loan books and paid out £18 billion ($33 billion) to facilitate the sale of its savings business, including its entire retail branch network, to Spain's Banco Santander.
link: http://money.cnn.com/2008/09/29/news/international/Europebanks_bailout.ap/index.htm?postversion=2008092911
That pretty much sums up the whole day. Will asian banks be spared of this? The only thing I felt sad for was the graduates that are going to complete their banking and finance degrees or masters soon. It's pretty much clear that the golden era of investment banking might be over.
The credit crunch till today
How has it impacted the big commercial banks in US till date? Just some flashbacks:
Some abstract:
Still, J.P. Morgan is weathering the crisis far better than its rivals. From July 2007, when the cyclone began, through the second quarter of this year, J.P. Morgan took just $5 billion in losses on high-risk CDOs and leveraged loans, compared with $33 billion at Citi, $26 billion at Merrill Lynch, and $9 billion at Bank of America (BAC, Fortune 500). And in this market, losing less means winning big. Before the crisis J.P. Morgan was a middle-of-the-pack performer; today it leads in nearly every category, starting with its stock. Since early 2007, its share price has dropped 24%, to $37 (as of Aug. 27), vs. declines of 44% for Bank of America and 68% for Citigroup. Last year its market cap was far below those of Citi and BofA. Today J.P. Morgan stands in a virtual tie with BofA for first place among U.S. banks, and it towers over Citi.
Source: http://money.cnn.com/2008/08/29/news/companies/tully_jpmorgan.fortune/index.htm?postversion=2008090216
As for now, the acquisitions/takeovers/bailouts are as follows:
Bank of America - Merrill Lynch at 50 billion
Barclays - Lehman brother's US banking units
JP Morgan - Bear Stearns, Washington Mutual (latest)
Fed - AIG, Fanny and Freddy
While other news include the last 2 investment banks, Goldman and Morgan Stanley to be converted to commercial banks for them to raise capital easily.
Injection of capitial from investors:
Goldman - Warren buffet (5 billion)
Morgan Stanley - Mitsubishi (8 billion), rumoured to have GIC and some other china institutions interested in it.
Some abstract:
Still, J.P. Morgan is weathering the crisis far better than its rivals. From July 2007, when the cyclone began, through the second quarter of this year, J.P. Morgan took just $5 billion in losses on high-risk CDOs and leveraged loans, compared with $33 billion at Citi, $26 billion at Merrill Lynch, and $9 billion at Bank of America (BAC, Fortune 500). And in this market, losing less means winning big. Before the crisis J.P. Morgan was a middle-of-the-pack performer; today it leads in nearly every category, starting with its stock. Since early 2007, its share price has dropped 24%, to $37 (as of Aug. 27), vs. declines of 44% for Bank of America and 68% for Citigroup. Last year its market cap was far below those of Citi and BofA. Today J.P. Morgan stands in a virtual tie with BofA for first place among U.S. banks, and it towers over Citi.
Source: http://money.cnn.com/2008/08/29/news/companies/tully_jpmorgan.fortune/index.htm?postversion=2008090216
As for now, the acquisitions/takeovers/bailouts are as follows:
Bank of America - Merrill Lynch at 50 billion
Barclays - Lehman brother's US banking units
JP Morgan - Bear Stearns, Washington Mutual (latest)
Fed - AIG, Fanny and Freddy
While other news include the last 2 investment banks, Goldman and Morgan Stanley to be converted to commercial banks for them to raise capital easily.
Injection of capitial from investors:
Goldman - Warren buffet (5 billion)
Morgan Stanley - Mitsubishi (8 billion), rumoured to have GIC and some other china institutions interested in it.
Bloody Monday
Looking at yesterday's trading in US, it was really sad to see that Lehman brothers has filed for bankrupcy and their workforce is close to 28,000 employees.
The news that caught me by surprise was the Bank of America and Merrill deal. Lehman has been on the news for the past few days and it was more or less expected in the worst case scenario that it will go bankrupt and close down due to the various rejections of buyers. However, Merrill, with a much more robust business model in its organization, took a surprise deal for 50 billion to be acqusitied by BOfA. Apparently, the losses that were stocking up in Merrill could be 1 of the reasons the deal had to be done quickly, possibly the lehman incident is another factor that Merrill's CEO, John Thain took into consideration as well.
Out of the 5 financial investment firms, 3 has been considered 'wiped' off. Will Goldman Sachs and Morgan Stanley suffer the same fate as well?
Next news that caught probably everyone by surprise was AIG. This was an insurance organization, which had incurred tremedous losses due to the subprime and it is now trying to raise capital in order to survive. AIG is one of America's largest insurer and probably more than 1/2 of US citizens own their policies. Anyway, on CNN Money, it was indicated that 20 billion will be injected to AIG from the N.Y state governor to save this insurer from suffering the same fate as Lehman brothers. How will this impact AIG in the long run?
I'm sure everyone is disgrunted on how exposed an insurance company was to the subprime. Would you put your life policy on such an organization in the future? There's going to be alot of PR and restructuring of the whole of AIG in order to restore consumer's confidence and put this incident behind.
Last but not least, WaMu a.k.a Washington Mutual, another large savings and loan company in the US, is also suffering the same fate as what Lehman brothers went through the past few weeks. Will they be able to raise capital to prevent the same fate?
The news that caught me by surprise was the Bank of America and Merrill deal. Lehman has been on the news for the past few days and it was more or less expected in the worst case scenario that it will go bankrupt and close down due to the various rejections of buyers. However, Merrill, with a much more robust business model in its organization, took a surprise deal for 50 billion to be acqusitied by BOfA. Apparently, the losses that were stocking up in Merrill could be 1 of the reasons the deal had to be done quickly, possibly the lehman incident is another factor that Merrill's CEO, John Thain took into consideration as well.
Out of the 5 financial investment firms, 3 has been considered 'wiped' off. Will Goldman Sachs and Morgan Stanley suffer the same fate as well?
Next news that caught probably everyone by surprise was AIG. This was an insurance organization, which had incurred tremedous losses due to the subprime and it is now trying to raise capital in order to survive. AIG is one of America's largest insurer and probably more than 1/2 of US citizens own their policies. Anyway, on CNN Money, it was indicated that 20 billion will be injected to AIG from the N.Y state governor to save this insurer from suffering the same fate as Lehman brothers. How will this impact AIG in the long run?
I'm sure everyone is disgrunted on how exposed an insurance company was to the subprime. Would you put your life policy on such an organization in the future? There's going to be alot of PR and restructuring of the whole of AIG in order to restore consumer's confidence and put this incident behind.
Last but not least, WaMu a.k.a Washington Mutual, another large savings and loan company in the US, is also suffering the same fate as what Lehman brothers went through the past few weeks. Will they be able to raise capital to prevent the same fate?
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