Wells Fargo repeated its bailout exit strategy on Tuesday, but appeared weak next to competitors that have already repaid taxpayer funds, or are moving forward with more definite plans to do so.
Its position comes at a delicate time, when rumors about the health of financial firms are circulating in the market. Traders have become more aggressive with bearish bets against Wells shares in particular in recent days.
Pressure was building on Wells, due to a report that competitor Bank of America (BAC Quote) is moving forward with plans to pay back bailout funds. Wells CEO John Stumpf told Bloomberg late in the day that the firm would like to pay back $25 billion in funds from the Troubled Asset Relief Program in the near future, but does not plan any capital raises to do so.
“We intend to pay back the government’s investment in Wells Fargo on behalf of U.S. taxpayers in a shareholder-friendly way,” spokeswoman Richele Messick told TheStreet.com in an email message earlier in the day. “We will work closely with our regulators to determine the appropriate time to repay the funds while maintaining strong capital levels.”
Colonial BancGroup Inc. has become the largest bank failure this year as the 2009 toll of financial institutions approaches 80. The Federal Deposit Insurance Corporation seized the struggling Alabama-based lender Friday and sold it to BB&T Corp. Late Friday, the FDIC announced four other banks had been closed: Community Bank of Nevada and its Arizona subsidiary, Community Bank of Arizona; Union Bank, Gilbert, Ariz; and Dwelling House Savings and Loan Association, Pittsburgh. The Colonial BancGroup deal will knock roughly $2.8 billion off a pool of money, known as the Deposit Insurance Fund, which the FDIC maintains to guarantee bank customer deposits.
Bank of America CEO Ken Lewis heads to Capitol Hill on Thursday, and he’s likely to be grilled by lawmakers about the government’s role in ensuring that the bank complete its controversial merger with Merrill Lynch.
According to emails released Wednesday that pull back the curtain on heated negotiations, Federal Reserve Chairman Ben Bernanke had suggested to another Fed official that “management is gone,” if BofA managers tried to flee the deal and later on needed further government assistance.
Continue reading BofA CEO Ken Lewis pressured by Fed
Leading the list of companies that need more capital was Bank of America (BAC, Fortune 500), which faces a $33.9 billion shortfall. Following behind was Wells Fargo (WFC, Fortune 500) and struggling auto finance firm GMAC, which will need to raise $13.7 billion and $11.5 billion respectively.
Beleaguered banking giant Citigroup (C, Fortune 500), which has taken hold of approximately $50 billion in government aid to date, is being asked to raise $5 billion, regulators said.
Continue reading Which banks did not pass the stress test
PNC Financial Services Group Inc: +5.06
Goldman Sachs Group Inc: +4.02
State Street Corp: +3.92
An intersting article at financialhighway.com asks the question: Are Canadian Bank dividends safe?
With Canadian banks being a significant dividend payer, they still rank pretty high in the investor’s list. But is it stable enough to hold.
This prompted me to do some due diligence and research a little more about possible dividend cuts. The banks are currently paying out between 55% AND somewhat over 65% in dividends; I think we all agree the bank earnings will continue to drop for the next few quarters. This brings up two important questions: how low will they go? And how low can they go before we see potential cuts? The first question is one that nobody can answer with any certainty, so I will focus on the second question.
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