Meredith Whitney is Not Buying What Vikram Pandit is Selling
Meredith Whitney clearly got out of the wrong side of the bed today, and her assault of Vikram Pandit continues. Meredith is not buying into any of the “broad themes” Pandit laid out last week, and continues to believe Citigroup’s C:NYSE) profit outlook looks punk over the next 3 to 5 years; the $21 billion in annualized profits they reached a few years back is likely to be the high water point for many years.
``The presentation was glaringly light on actual mechanics, and run-rate earnings figures seemed to cherry pick revenue and credit scenarios from recent years,’’ Whitney wrote in a note today. Pandit ``set no delivery date as far as execution,’’ she wrote.....``The credit outlooks and the loss assumptions for banks across the board are way too low,’’ Whitney said in the interview. ``The outlook for earnings across the board is going to be much worse than people expect.’’ Bloomberg
Whitney continues to stress the challenges Citi faces in upgrading their computer networks, which is a hodgepodge legacy system left over from their acquisition spree. Whitney missed the bottom in Citi and the financials, but it does not appear she is going to get constructive on this stock anytime soon.
Citi’s Pandit Faces `Impossible Feat,’ Whitney Says
Bloomberg
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The content contained in this blog represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Positions
Pandit ‘s Plan Takes Shape
Originally Published in the News May 9, 2008 1:15 PM
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Vikram Pandit has barely had time to settle into his new job and roll up his sleeves, yet his detractors are legion. The initial reaction to his strategic plans laid our earlier today is not great, at least if you look at how the stock is trading.
Citigroup Inc. Chief Executive Officer Vikram Pandit plans to get rid of about $400 billion of assets over the next three years as he starts to whittle away at the company built by Sanford ``Sandy’’ Weill.
When he’s done, Citigroup may cease to be the biggest U.S. bank, a title the firm has held for a decade.
``There will be more’’ divestitures, Pandit, 51, told shareholders at a meeting today at the bank’s New York headquarters. The company, which lost $5.1 billion in the first quarter, has recorded more than $40 billion of credit losses and writedowns since the subprime mortgage market collapsed last year. Bloomberg
The recent respite for financial stocks ended rudely this week, although the selloff in individual names seems worse than in the XLF ETF
Pandit did not knock the lights out and his Old Lane hedge fund, but his current task, and challenges, are far different. I will be willing to give him the benefit of the doubt, but taking a stand on the stock here is another matter. The bounce appears over, and Citi’s stock is more volatile than Meredith Whitney’s mood swings.
Citigroup Plans to Shed About $400 Billion of Assets
Bloomberg
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The content contained in this blog represents the opinions of 1440 Wall Street. This commentary in no way constitutes a solicitation of business or investment advice. It is intended solely for the entertainment of the reader, and the author. No Positions
Business as Usual: Sex, Drugs and Derivatives
For the past several years I have been mourning the end of an era on Wall Street. But it did not disappear, it just moved from the equity BuySide/SellSide to Credit derivatives:
``It’s all about relationships,’’ said Andy Nybo, a senior analyst at Tabb Group in New York, who analyzes market structures and exchanges. ``It’s more than a phone call. You invite him to a Yankees game. It’s tight-knit and built on entertainment and social interaction.’’
That’s not unusual in the world of derivatives brokers, according to Willy Stemp, 52, a consultant at London-based Mark to Market Plc. Some entertain traders every night of the week in the hope of winning a client, said Stemp, a former broker.
``Brokers aren’t looking for highly technical Ph.D.s and MBAs,’’ Stemp said. ``They’re looking for personality people, with a decent education and sharp wits.’’ Bloomberg
I thought Spitzer put an end to the most egregious behavior years ago, but apparently not.
If you want sex, drugs and derivatives, you will have to read the article below. But William Cohan’s comments are fit to print:
``It’s astounding that people get paid that much to be intermediaries,’’ said William Cohan, a former investment banker with Lazard Ltd. in New York and now an author of books on Wall Street.
Shady stuff.
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Credit Seizure? $6 Million Pay Turns on Relationships
Bloomberg
Brokers Fade Right on Cue
Raymond James is a great firm. Sure, their annual conference is a good time, particularly for grappa lovers, but the enormous Florida oranges they send to the BuySide every Holiday season is the firms hidden jewel. Big and juicy, and best of all, gratis, which of course is the BuySide's favorite word.
Speaking of gratis, they even enable portions of their research to be read for free, and Investment Strategy from Jeff Saut is a steal. He is no perma-bear, which is the worst kind of critter, and lets prices help shape his posture, Buy low, sell high.
I have been trying to get constructive on the financials for some time, but there always seems to be a fly in the ointment. True, the stocks have stymied the bears, at least if you look at the price action in the XLF ETF since mid-January. But it is hard to make a case for the stocks, outside of a dead cat bounce, due to (valuation) multiple compression, ongoing de-leveraging, dilution from capital injections and perhaps most important, increased regulation.
But much of that news is priced in, although many were slow to recognize issues like FAS 157. And now the herd is catching on the latest reason to short the brokers, at least for a trade:
May 5th
Short-term rallies may come and go, but Saut says the coming "re-regulation" of the financial industry is likely to crimp industry profits and P/E ratios for the foreseeable future.
Saut's thesis sure reared its ugly head today:
