Financials Weekly Notes: Citigroup, BofA & JPMorgan

Bank stocks slid over trading this week with investors sizing up their expectations from the 2-day EU leaders’ summit that concluded last Friday. The realization that the summit did almost nothing to address the short-term problems of growing fiscal deficits among EU member nations pulled the plug on stock prices which had rallied substantially last week. Moody’s announcement of a negative outlook on all EU nations, with the possibility of a rating downgrade next quarter, only reinforced the failure of the frantic efforts put in by EU leaders. ((Communiqué issued by European policymakers does not relieve pressure on euro area sovereigns, Moody’s Investors Service, Dec 12 2011)) As investors continue to wait for the ECB to wave its magic wand and rescue the European nations by absorbing more debt from the system, bank shares did not see much movement over Wednesday and Thursday. But Fitch’s decision to downgrade the ratings of 7 major banking institutions, including Bank of America (NYSE:BAC), Barclays (NYSE:BCS), Citigroup (NYSE:C) and Credit Suisse (NYSE:CS), will obviously not help sentiments at Wall Street.

Citigroup

Citigroup completed its exit from the spun-off Primerica insurance business this week. The banking group sold the remaining 8.1 million shares of Primerica it held for about $180.5 million. This move comes within weeks of an agreement from Primerica to buy-back nearly 8.9 million of its shares from Citi.

After its announcement last week that it will trim as many as 4,500 jobs across its global operations, the group also started work on its downsizing plans. In a regulatory filing, Citi mentioned that as many as 413 New-York based positions will be reduced over the next few months.

You can read more about this in our article Moody’s, Euro Concerns Weigh on Citi & Bank Stocks.

See our full analysis for Citi’s stock

Bank of America

Based on the findings of a recent Merrill Lynch survey, Bank of America is bulking up its Merrill Edge offering for preferred customers. The bank announced its decision to hire 160 more financial solutions advisors (FSAs) over coming months. ((Bank of America to Hire More Than 160 Financial Solutions Advisors Throughout Southern California and Arizona, Bank of America Press Release, Dec 12 2011)) Bank of America refers to customers with investable assets between $50,000 and $250,000 as preferred customers, and launched the Merrill Edge offering to provide them with financial advice last year.

See our full analysis for Bank of America’s stock

Morgan Stanley

Morgan Stanley finally called to close its stand-off with MBIA over credit-default swap contracts entered between the investment bank and the bonds issuer in 2009. ^[1] MBIA will be paying Morgan Stanley about $1.1 billion as settlement to close the open contracts, which would still mean that the investment bank will have to record losses of about $1.2 billion over these trades for this quarter.

Morgan Stanley also announced its decision to reduce its global headcount by as much as 1,600 over Q1 2012. ^[2]

See our full analysis for Morgan Stanley

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1. MBIA Credit-Default Swaps Tumble on Morgan Stanley Settlement, Bloomberg Businessweek, Dec 14 2011 [↩]
2. Morgan Stanley to Eliminate About 1,600 Jobs as Revenue Declines, Bloomberg Businessweek, Dec 15 2011 [↩]