Banks are “Screwed”

Snapshot - Q3 Results from Wall street

By (gi)ULLU
-I know
(“gi” Stands for Global Indian)
 Disclaimer

• Plagiarized from reports appearing on

various websites
• Intention is to present a one stop
consolidated view of Banks and the
Fallout of subprime mess.
 Goldman Sachs Group Inc
• Goldman Sachs Group Inc.
– profit rose to $2.85 billion, compared to $1.55 billion.
– Revenue soared 63 percent to $12.33 billion from $10.18 billion last year
• Streams
– Investment banking produced record quarterly revenue of $2.15 billion during the
quarter- powered by its business in advising on takeovers
– stock trading (principal Trading and Investments) also racked up a record $3.13
billion of revenue during the period
– benefited from the nearly $1 billion sale of its interest in Horizon Wind Energy
LLC
• Goldman, had "significant losses" on subprime loans and mortgage-backed
securities. However, short positions on mortgage securities allowed it to offset those
losses
– $1.71 billion in credit losses in the quarter - including loans extended for
leveraged buyouts.
– $2 billion poured into its Global Equity Opportunities fund (its hedge fund), other
investors added an additional $1 billion
– The fund was hit hard when its computer-driven "quantitative" investment
strategies were disrupted by triple-digit swings in the financial markets
• Goldman also counts more than half of its revenues coming from overseas, which
reflects the investment bank's diversity.
• In addition, it has the lowest percentage of exposure to the subprime market
compared to rivals
 Morgan Stanley
• Morgan Stanley
– Income fell to $1.47 billion from $1.59 billion
– Revenue climbed 13 percent to $8 billion from a year
earlier
• Morgan Stanley had decline in revenue at its
fixed income sales and trading division
– had to take a write-down totaling $940 million to
reflect the market value of certain loans on its books
• Losses totaling $480 million in its quantitative, or
computer-driven, investments, which were hit
hard during the month of August amid extreme
volatility in the stock market
 Bear Stearns
• Bear Stearns
– net income for the period sank 61 percent to $171.3 million, from the year-earlier.
– Revenue fell to $1.3 billion from $2.13 billion last year
• Streams
– Fixed-income revenue fell 88 percent during the quarter to $118 million, or about
9 percent of total revenue
– In the same period last year, fixed income accounted for about 44 percent of
Bear's total revenue
– Equities revenue climbed about 53 percent to $719 million
– Investment banking revenue fell nearly 9 percent to $211 million

• $200 million loss related to the Bear Stearns Asset Management High-
Grade hedge funds.
• It also booked $700 million in write downs related to mortgage assets and
private equity loan commitments that lost value during the credit crunch
• Bear, a leader in the business of packaging home loans into tradable
securities
 Lehman Brothers
• Lehman Brothers
– Net income fell to $887 million, from $916 million
– Net revenue climbed 3 percent to $4.3 billion
• Lehman's fixed-income losses were largely
offset by strength in its investment management
business, as well as its investment banking and
equities capital markets divisions
• $700 million in write downs due to its mortgage-
related and leveraged loan investments
 Citigroup Inc
• Citigroup Inc
– Net income fell 57 percent to $2.38 billion,down from $5.5 billion
– Quarterly revenue rose 6 percent to $22.7 billion from $21.4 billion a
year earlier
• Streams
– Citi markets and banking and alternative investments divisions, which
saw their revenue tumble 24 percent and 63 percent, respectively
– Global consumer group (credit card, lending and consumer banking div)
overall revenue climbed 14 percent during the quarter due to
international growth, domestic revenues were flat, hurt by a decline in
commercial lending
– Citigroup's global wealth management division reported revenue of
$2.48 billion, a 41 percent jump over the year-ago period
• Citi announced $3 billion in write downs
– has revealed losses totaling just under $6 billion, including $3 billion for
defaulted loan provisions
 J.P. Morgan Chase & Co.
• J.P. Morgan Chase & Co.
– -Net income moved up to $3.4 billion from $3.3 billion in Q3 07
– Net managed revenue rose 4 percent to $17 billion in the quarter

• J.P. Morgan's overall results were buoyed by strength in asset

management, card services and commercial banking
• Streams
– Asset management revenue
• soared 35 percent to a record $2.2 billion
• profit rose to a record $521 million
– Investment banking profit fell 70 percent to $296 million

– Card services and commercial banking both posted double-digit earnings growth

• J.P. Morgan took a $1.3 billion markdown on loans committed for leveraged
buyouts,

– total managed provisions for credit losses rose 67 percent to $2.4 billion
 Bank of America
• Bank of America
– net income fell 32 percent to $3.70 billion from
$5.42 billion a year ago
– decline in revenue, down 12 percent to $16.3
billion from $18.49 billion
• Bank of America's global corporate and
investment banking revenue suffered the
biggest hit, declining $1.33 billion, or 93
percent, because of this summer's market
disruption.
 Washington Mutual
• Washington Mutual
– net income fell 72 percent to $210 million, from $748
million
– Revenue during the quarter fell nearly 12 percent to
$3.39 billion from $3.52 billion a year ago
• WaMu said it beefed up its reserves for loans
that might go bad to $967 million during the
quarter and predicted that number would grow to
as much as $2.9 billion
 Wachovia Corp
• US fourth largest bank
– Revenue grew 4 percent to $7.35 billion from $7.04 billion
– net income fell to $1.69 billion compared to $1.88 billion
• Streams
• Corporate and investment banking operations earnings
sank 80 percent
– revenue tumbled 51 percent to $819 million ,earnings of $105
million, down from $428 million
– Wachovia's general bank saw earnings jump 33 percent, with
revenue climbing 30 percent to $4.5 billion. Results were driven
by increased loans and deposits and October 2006 acquisition of
Golden West Financial Corp., which expanded Wachovia's
mortgage business
• Wachovia recorded a provision for credit losses of $408
million, up from $108 million
 Master Liquidity Enhancement
Conduit, or M-LEC
• A group of banks led by Citigroup Inc., Bank of America Corp. and
J.P. Morgan Chase & Co. said they have agreed to create a fund
that will buy shaky mortgage-backed securities
• The banks said the fund could be up and running within 90 days
– The fund will buy highly-rated assets from so-called structured
investment vehicles, or SIVs. The size of the fund -estimated between
$75 billion and $100 billion.
– SIVs are investment vehicles that issue short-term debt to make
investments in longer-term securities, including those backed by
mortgages
– As of August, SIVs had about $400 billion under management

• Fund is aimed at boosting the market for asset-backed commercial

paper and medium-term notes issued by SIVs
• But since the fund will only buy "qualifying highly-rated assets,"
some observers are skeptical about how much of an impact it can
have on the debt market