Financial Winners and Losers: JPMorgan
Updated from 1:59 p.m. EDT
Financial stocks were mixed Tuesday afternoon as three major U.S. banks sought government approval to repay government bailout money.
Goldman Sachs
(GS) - Get Goldman Sachs Group, Inc. Report
,
Morgan Stanley
(MS) - Get Morgan Stanley Report
, and
JPMorgan Chase
(JPM) - Get JPMorgan Chase & Co. Report
have
a combined $45 billion of government preferred equity investments,
Bloomberg
reported citing people familiar with the matter. The three banks need approval from the
Federal Reserve
TheStreet Recommends
to return the money, according to the report.
Meanwhile, Credit Suisse raised its price target for Morgan Stanley shares to $28 from $26, based on improved market conditions. The firm also increased its earnings estimates for Morgan, raising its full-year earnings target to $1 a share from 95 cents. For the second quarter, Credit Suisse now expects earnings of 40 cents a share compared to its previous view of 15 cents, as the firm believes core business trends have improved, bid-ask spreads remain healthy, and loss ratios are down.
The analyst move came as Morgan Stanley announced that it is commencing a secondary offering of all of its remaining ownership in
MSCI Inc.
(MXB)
, which will complete the separation that began in 2007. The offering will consist of 27.7 million shares of MSCI class A common stock, par value of a penny a share. MSCI Inc. will not receive any of the proceeds from the sale of the class A common stock.
Morgan Stanley shares rose 2.2% to close at $28.91. Goldman shares gave back 1.4% to $141.15 and JPMorgan shed 3.9% to $35.81.
Among other bank stocks,
Citigroup
(C) - Get Citigroup Inc. Report
added 3.6%, while
Bank of America
(BAC) - Get Bank of America Corp Report
retreated 4.1% and
Wells Fargo
(WFC) - Get Wells Fargo & Company Report
slid 5.7%.
Elsewhere,
(AXP) - Get American Express Company Report
said late Monday it will cut roughly 4,000 jobs, or about 6% of its workforce, as part of an effort aimed at saving roughly $800 million for the rest of the year. The announcement comes seven months after AmEx reduced its headcount by 7,000 workers.
Credit Suisse also published a research note on AmEx, raising earnings targets for 2009 and 2010 by 10 cents each to $1.50 and $1.90 a share, respectively. The changes reflect the staff reduction savings through the restructuring plan. AmEx shares closed down 5.1% to $24.79.
In other analyst news, RBC Capital Markets upgraded
State Street
(STT) - Get State Street Corporation Report
to a top pick from outperform and raised its stock price target to $55 from $40. RBC said it expects the tangible common equity, or TCE, ratio by year-end to be in excess of 6%, which will put concerns behind the bank by the end of the year. RBC says that in 2010, State Street can shift the strategic focus from conservation of capital to more of a growth strategy.
Late Monday, State Street announced a common stock offering of $2.0 billion, or 51.3 million shares, priced at $39 a share. The bank estimates that net proceeds will total about $1.9 billion, after deducting estimated expenses and underwriting discounts and commissions, or about $2.2 billion if underwriters fully exercise their option to purchase 7.7 million additional shares. State Street plans to use the money to pay back $2 billion in funds borrowed through the TARP. Shares of State Street climbed 3.4% to $43.21.
Raymond James upgraded
OptionsXpress
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,
Charles Schwab
(SCHW) - Get Charles Schwab Corporation Report
, and
TradeStation
(TRAD)
to outperform, and upgraded
TD Ameritrade
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to strong buy.
BlackRock
(BLK) - Get BlackRock, Inc. Report
preliminarily has been granted a second-round interview with the Treasury Department to become one of a few money managers to buy toxic assets from U.S. banks, using taxpayer money,
The Wall Street Journal
reports, citing people familiar with the matter. Shares of BlackRock finished down 3.2% to $139.68.
In earnings news,
Mitsubishi UFJ Financial Group
(MTU)
reported a $2.6 billion annual loss, swinging from a year-ago profit due to writedowns of securities, as the Japanese bank had projected earlier this month. MUFG said it expects a profit for the fiscal year through March 2010, but shares ended lower by 1.1% at $6.39.
Small and midsize U.S. banks could suffer $100 billion in losses generated by commercial real-estate loans by the end 2010 if economic woes deepen, according to research conducted by
The Wall Street Journal
. Total losses at those banks could surpass $200 billion over that period, according to the
Journal's
analysis, which utilized the same worst-case scenario employed by the government's stress tests of 19 major U.S. banks.
The
Journal
also reported that
Lehman Brothers
said in a court filing that its broker-dealer and investment banking services were likely undervalued in a hasty deal struck in September to unload the businesses to
Barclays
(BCS) - Get Barclays Plc Report
. Lehman suggested the arrangement resulted in a "windfall" in "the billions of dollars" for Barclays, according to the report. Barclays shares rose 1.4% to $17.75.
