Financials Weekly Review: Bank of America, Credit Suisse & Goldman Sachs
The financial sector continued to be in the doldrums last week as investors tried to digest the news of the S&P downgrade on U.S. long-term debt and size up the potential fallout from the ensuing battle in the Eurozone to keep several countries afloat. With overall pessimism ruling global markets, most financials saw their stocks take a hit. European banks have fared worse than their American counterparts with uncertainty around a financial transaction tax, the potential issuance of Eurobonds and fears of contagion if one or more countries/ banks/ markets collapse in Europe. Shares of Barclays (NYSE:BCS), RBS Group (NYSE:RBS), Deutsche Bank (NYSE:DB), UBS (NYSE:UBS) and Credit Suisse (NYSE:CS) all declined during the week.
You can read more about the financial transaction tax development in an article titled Impact of Financial Transactions Tax on European Banks.
Below are some company-specific events across the financials sector witnessed over this week.
Bank of America
It was a busy week for Bank of America (NYSE:BAC) as the bank tried to buoy investor sentiments which collapsed after the $10 billion lawsuit against it by AIG last week.
With doubts being raised about the quality of the bank’s asset portfolio, Bank of America initiated talks with Blackrock (NYSE:BLK) to offload up to $1 billion of unwanted property investments. [1] Earlier in the week, the bank also announced its decision to exit all its international credit card businesses. (See Bank of America Sharpens Focus on US Cards, Raises Cash Reserves with Sale)
Bank of America showed its intentions to dramatically reduce costs by announcing that it will cut 3,500 jobs this quarter and restructure its businesses, which would lead to thousands of additional job-cuts. [2]
See our full analysis of Bank of America
[trefis_slideshow ticker=”BAC” rhs=”3″]
Credit Suisse
Credit Suisse (NYSE:CS) touched its 52-week low of $26.46 this week with the effect of weak European market conditions weighing on the bank’s stock price after CS reported lower than expected performance figures for Q2 2011 a while ago. The likelihood of the bank going for a settlement with the U.S. Department of Justice on charges of aiding clients in evading U.S. tax has also added to the decline in the company’s stock price. The settlements are expected to total about $1 billion. (See Credit Suisse Should Settle Tax Probe to Clear Overhang)
See our estimates for Credit Suisse.
Goldman Sachs
Goldman Sachs (NYSE:GS) was sued by Allstate (NYSE:ALL) for allegedly hiding the risks involved in the underlying mortgage portfolio for securities worth $123 million bought by the largest publicly traded U.S. home and auto insurer. (See Allstate Goes After Goldman on Mortgages as Banks Continue to Feel Heat) This is the first in a string of lawsuits Goldman had already warned about earlier this month. [3]
Click here for our full analysis of Goldman Sachs.
Notes:- Bank of America Corporation In Talks To Sell Investments To Blackstone Group L.P., Reuters, Aug 16 2011 [↩]
- Bank of American set to slice jobs, The Wall Street Journal, Aug 19 2011 [↩]
- The Goldman Sachs Group, Inc. Says AIG, Allstate, Fannie, Others Threatened Mortgage Lawsuits-DJ, Reuters, Aug 9 2011 [↩]