After falling into the red in the second quarter and revising its 2009 results to show an even deeper loss, Espirito Santo Bank got some relief in the form of $10 million in capital from its parent company.
Portugal-based Banco Espirito Santo injected $10 million into its Miami-based subsidiary in the second quarter, according to its filing with the Federal Financial Institutions Examination Council. That boosted its capital ratio to well above regulatory requirements.
It also helped soften the blow of the bank’s recent stumbles.
On June 1, Espirito Santo Bank restated its 2009 results to show a $3.3 million loss. It originally reported a $2.3 million loss for that year. The change came because the bank revised its expense to reserve for future loan losses to $9.2 million, increased from the originally reported expense of $8.2 million.
Sometimes, when banks review the problem loans, they recognize drops in the appraised values of the collateral properties, which causes them to go back and take additional reserves.
In the second quarter, Espirito Santo Bank lost $431,000, but it was still in positive territory for the year because it earned $954,000 in the first quarter.
The bank fell into the red mostly because its expenses to reserve for problem loans grew while it collected less revenue from net interest income.
Espirito Santo Bank made progress in reducing its level of problem loans. As of June 30, the bank had $19 million in noncurrent loans, representing 5.25 percent of its total loans. As of March 31, it had $26.2 million in noncurrent loans, representing 6.87 percent. The bank has restructured many of its loans that were delinquent.
The bank’s $7.3 million reserve for future loan losses covered 38 percent of its noncurrent loans at midyear. The restatement of its 2009 results increased that coverage ratio significantly from where it was originally at year-end.
Espirito Santo Bank was the 21st-largest bank chartered in South Florida as of March 31, with $569 million in assets. By June 30, it had grown to $580 million in assets. Its deposits were up to $480 million from $478 million over that period. However, the bank’s loans dropped to $355 million from $375 million.
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Discount Windows & Doors has opened a showroom on Kamehameha Highway, next to King Nissan in Kaneohe.
The facility, at 45-564 Kamehameha Highway, is in addition to the company’s 4,000-square-foot office and warehouse space in North Kaneohe.
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Urban Outfitters Inc. said Thursday it fashioned a first-quarter profit of $53 million, a 72 percent increase.
The net income, equal to 31 cents a share, compared to $30.8 million, or 18 cents, a year earlier.
Performance was helped by greater store productivity, e-commerce and international expansion and new brands, the company said.
Sales for the three months ended May 6 totaled $480 million, an increase of 25 percent. On a comparable basis, measuring the same stores as a year earlier, sales were up 16 percent.
Philadelphia-based Urban Outfitters (NASDAQ:URBN) sells clothing and household accessories. It has 157 Urban Outfitters, 142 Anthropologie and 35 Free People locations.
Huge losses in the Small Business Administration’s main loan program have led President Barack Obama to propose phasing out the government subsidy for 7(a) loans beginning in fiscal 2012.
This would force the agency to support its government-guaranteed loans by charging higher fees on borrowers and lenders. That’s what occurred when Congress ended the subsidy for 7(a) loans – at President George W. Bush’s request – in 2004. Congress restored the subsidy this fiscal year, at a cost of $80 million.
The economic stimulus bill provided the SBA with an additional $375 million to waive fees for borrowers on most 7(a) loans and 504 loans, which mostly finance real estate, and increase the government guarantee on SBA loans from the typical 75 percent to 90 percent. Those enhancements made the loans more affordable for borrowers and less risky for lenders, enabling SBA lending to rebound after cratering during the financial crisis.
SBA loans are an important source of credit for small businesses that can’t obtain conventional loans.
In December, Congress came up with another $125 million to extend the fee reductions and higher loan guarantee until the end of February. Obama wants Congress to pass additional legislation extending them through Sept. 30, the end of the fiscal year.
The president’s budget proposal for next fiscal year, however, reveals that defaults on SBA loans have exploded over the past year, costing the government a projected $4.5 billion. Most of the problem loans were made between 2005 and 2007.
The administration proposes a $165 million subsidy for 7(a) loans next year, double this year’s subsidy if economic stimulus funds are excluded.
Beginning in 2012, however, Obama wants to give the SBA “the flexibility to adjust fees in the program to enable it to be self-sustaining over time,” according to the president’s budget plan. This would “strengthen the program’s long-term economic foundation,” the budget plan states.
Default rates for 7(a) loans aren’t much worse than the default rates for conventional loans, said Tony Wilkinson, president and CEO of the National Association of Government Guaranteed Lenders, which represents SBA lenders.
If the economy improves, default rates should fall, he said. A better business climate also could make an end to the government subsidy for 7(a) loans bearable, he said.
NEW YORKâGoogle appears to be preparing to market its own smartphone, a move that would intensify the company’s rivalry with Apple Inc., whose iPhone dominates the high-end smartphone market.
On Friday, Google distributed a new phone running its own Android operating software to many of its employees. On the messaging service Twitter, some Google employees described the device as a "Google phone," renewing speculation that the company is getting ready to release a mobile phone with its own brand.
Google employees who asked not to be identified confirmed recently that the company was indeed developing new hardware and software for Android phones and coming up with new ways to get those phones into the hands of consumers, but they would not give more details. One Google employee said the new phone was designed by Google No teletrak payday loan.
The Wall Street Journal reported on its website that Google would sell the phone directly to consumers rather than through carriers. The move, if confirmed, would signal a more aggressive effort by Google to become a force in mobile devices.
On Saturday Google acknowledged on a corporate blog that it was indeed distributing a new class of Android phones to employees to experiment with new features.
Mario Queiroz, a vice-president of product management, said, "This means they get to test out a new technology and help improve it."
CARACAS–A senior minister and close confidant of Venezuelan President Hugo Chavez resigned Sunday in a growing banking scandal that has triggered a purge of businessmen with ties to the government.
In a move likely to win him support, Chavez said he had accepted the resignation of Science and Technology Minister Jesse Chacon, whose brother was arrested Saturday following the closure of the bank he headed.
"Yesterday Jesse Chacon asked if the best thing for the government would be that he offered his resignation and I said I believe so. He will have to leave the government," Chavez said in his weekly television show where other ministers were among the audience.
Chacon took part in a 1992 coup that sought to bring Chavez to power and both men were jailed for their actions. He has held numerous posts under Chavez.
Police have also arrested Giuzel Mileira, the director of the Banco Real, bringing to eight the number of bankers in custody.
Another banker with government ties fled to Miami, Chavez said.
Those detained include a businessman who made more than one billion dollars partly by selling corn to government-subsidized supermarkets.
Venezuela last week closed the seven small banks for regulatory breaches including capitalization problems and unexplained funds, causing market turmoil as Chavez threatened to nationalize the financial system.
Most analysts agree that Chavez is unlikely to risk instability through a widespread nationalization of the country’s best-capitalized and profitable banks.
The rise of a new mega-rich elite during his decade in office has been a liability for Chavez, who wants to build a socialist society in Venezuela and took office in 1999 promising to end corruption.
The arrest of executives widely considered to be corrupt is likely to be popular with Chavez’s supporters before legislative elections in September.
More detentions are expected because authorities have issued 27 warrants including nine requests to Interpol for international arrests.
Reuters News Agency
The Federal Reserve should lose its authority to bail out big, failing financial firms like AIG and Bear Stearns under proposed reforms aimed at limiting the collateral damage from such failures, U.S. Treasury Secretary Timothy Geithner said on Thursday.
Geithner, in testimony to the U.S. House of Representatives Financial Services Committee, said the Fed should keep its ability to act as an emergency lender of last resort, but only to solvent firms in times of severe stress in financial markets — with Treasury consent.
“Any firm that puts itself in a position where it cannot survive without special assistance from the government must face the consequences of failure,” Geithner said. “The proposed resolution authority would not authorize the government to provide open-bank assistance to any failing firm.”
Geithner said a bill by the Financial Services Committee’s chairman, Representative Barney Frank, meets the tests for key elements of a resolution authority that the Obama administration would like to see passed.
It is a “comprehensive coordinated answer to the moral hazard problem” and does not provide any implicit guarantees for financial institutions, he said.
“We cannot put taxpayers in the position of paying for the losses of large private financial institutions,” Geithner said cheap payday advance. “We must build a system in which individual firms, no matter how large or important, can fail without risking catastrophic damage to the economy.”
Geithner said large failing firms should be put into a receivership managed by the Federal Deposit Insurance Corp that would seek to “unwind, dismantle, sell or liquidate the firm in an orderly way” where losses would be borne by shareholders and creditors of the firms.
The costs of such shutdowns would be borne by other large financial firms, imposed afterward, Geithner said. This would eliminate a standing insurance fund that creates expectations that the government would step in to protect creditors and shareholders.
Regulators also must impose tougher capital and liquidity standards on large firms that take on more risk, Geithner said, to reduce the probability of a larger firm experiencing financial distress.
But Geithner said there would not be a set list of large firms held to higher standards, adding that the government did not want to provide a false impression that such firms would be protected from failure by the government in times of stress.
(Reporting by David Lawder; Editing by Andrea Ricci)
In the 1980s, when stocks mostly surged, a few mutual fund managers became the equivalent of rock stars.
Tops among them: Peter Lynch, who racked up average annual returns of a remarkable 29 percent over a 13-year run.
Lynch did it at Fidelity Magellan, which continued to grow after he left in 1990. What once was the world’s largest fund swelled from $13 billion to nearly $110 billion a decade later. Assets peaked three years after the fund shut its doors to new investors because it became so big it was hard to manage effectively.
So where is Magellan now? It’s at $24 billion, and struggling to draw investors who fled in droves after years of mediocre performance. Magellan is still big by any standard, but it’s merely Fidelity’s fourth-largest stock fund.
"I don’t worry about too many assets now," says current manager Harry Lange, who took over in late 2005.
Magellan reopened to new investors early last year, but those who gave it a try were disappointed. The fund’s 2008 plunge? Forty-nine percent — steeper than the market’s nearly 39 percent decline. Blame bad bets on dogs like AIG and Wachovia — financial companies that Lange held on to for too long.
But Lange is turning things around, thanks to a sharp departure from his predecessor’s style. Where Robert Stansky was criticized for too closely mirroring broader markets, Lange has tilted the fund heavily in favor of growth stocks — companies whose comparatively steep share prices are backed by expectations that earnings will keep growing rapidly. He’s eased out of cheaper value stocks with steadier earnings, and takes a go-anywhere approach in keeping with the fund’s namesake 16th century explorer. Nearly one-quarter of Magellan’s holdings are international stocks.
Many of the same bets on riskier stocks that weighed Magellan down last year are lifting it in 2009. It’s up 35.6 percent, easily topping the nearly 17 percent gain for its benchmark, the Standard & Poor’s 500, and beating nearly nine of 10 of its peer funds.
So is it time to climb back aboard Magellan? Only if you’re willing to commit to a fund whose penchant for racy stocks makes it unusually volatile.
This year, the fund expanded its already substantial stake in recently hot technology stocks — its second- and third-largest holdings are specialty glass maker Corning Inc. (up 62 percent this year) and semiconductor maker Applied Material (up 34 percent). It’s also favored hard-hit fare like home builder Toll Brothers (down 8 payday loan.8 percent) and big banks — Magellan’s most recent list of top 10 holdings included Bank of America, J.P. Morgan Chase, Wells Fargo and Goldman Sachs.
Lange has turned Magellan into "a fund for optimists," according to Morningstar’s lead Fidelity analyst, Christopher Davis.
"If you look at its portfolio, it’s positioned for an economy that’s improving," Davis says, noting an absence of such defensive favorites as Wal-Mart and Procter & Gamble.
Lange says this year he’s slightly eased off his leaning toward growth stocks but still heavily favors the category. Though value stocks outperformed growth for an eight-year run after the dot-com bubble deflated early this decade, the pendulum swung back to growth last year — financial stocks that were hit so hard last year are mostly in the value category. Growth’s ranks include plenty of tech names that have recently fared well.
Lange still likes tech because of its big stake in emerging markets, where consumers in countries like China and India continue to drive growing demand for gadgets including mobile phones from makers like Nokia, Magellan’s top holding. He figures that trend will continue giving growth an edge over value. "I’m pretty confident that growth will be as strong in the next six to 12 months," Lange says. "There are a lot of people out there who think after that, it will be a sluggish recovery. I’m more bullish than that."
As for his fund’s choppiness, Lange acknowledges that with his growth-oriented style, "it’s pretty tough not to have volatility in these unusual times."
Even with this year’s strong results, winning back investors who fled Magellan has proved tough. Lange is still trying to shake the cumulative record of the last 10 years, a period when Magellan posted an average annual loss of 1.2 percent, slightly worse than most of its peers.
"This is not your grandfather’s Magellan fund," says Jim Lowell, a former Fidelity employee who runs an independent newsletter, FidelityInvestor.com, that evaluates the company’s funds.
Lowell currently recommends Magellan but says it’s no longer appropriate as a core retirement holding for investors who are looking for the broad exposure it once offered. Instead, Magellan is geared toward those seeking more growth exposure in an otherwise diversified portfolio.
The stock price of AMR Corp. surged on Thursday after the American Airlines parent company said it obtained $2.9 billion in new financing.
AMR’s (AMR, Fortune 500) stock was up more than 20% one hour after the opening bell.
The company, which owns American Airlines and American Eagle, said the funds included $1.3 billion in new liquidity, including $1 billion in cash from the advance sale of AAdvantage frequent flyer miles to Citi (C, Fortune 500), and nearly $300 million via a cash loan from GE Capital Aviation Services.
The remaining $1.6 billion comes from sale-lease finance commitments for Boeing 737 aircraft that were previously owned by the company, AMR said.
AMR said it will use the funding to purchase additional aircraft and to add first class cabins to existing aircraft. The company also said it will shift more capacity to hubs in Dallas-Forth Worth, Chicago, Miami and New York City.
Throughout the recession, the airline industry has been cutting back on flights to cut costs in the face of fuel price volatility and reduced air travel. But AMR said that capacity is actually expected to increase by 1% in 2010.
"Today’s announcement is obviously positive for the company and our employees, as this new financing will help us navigate through a tough environment and lay the groundwork for future success," said AMR Chief Executive Gerard Arpey, in a press release.
Microchip king Intel boosted its sales outlook for the current quarter on Friday, signaling an end to the deep PC market swoon.
The company raised its third-quarter revenue expectations to a range between $8.8 billion and $9.2 billion from a range of $8.1 billion to $8.9 billion. The new estimates trump Wall Street’s revenue forecasts for the current quarter of $8.6 billion, according to a Thomson Reuters survey of analysts.
Intel also said its gross margin will be in the "upper range" of its previous guidance of 51% to 55%. Analysts currently expect gross margin of 53.2%.
The tech bellwether said it expected demand for microprocessors and chipsets would be stronger than it had previously expected in the current quarter. That’s largely due to the PC market, which Intel last month said has started to bounce back sharply.
PC sales were expected to rebound this year, but not until the fourth quarter, when Microsoft’s (MSFT, Fortune 500) Windows 7 is set for release payday loan. But a recent Gartner study showed that computer sales are already showing signs of improvement. Apple (AAPL, Fortune 500) released its new Snow Leopard operating system Friday, which could boost Mac sales somewhat this quarter.
Intel already pleasantly surprised analysts last month when its second-quarter sales and profit easily beat Wall Street’s expectations. In its July 14 announcement, the company said it was very upbeat about the future, and its guidance blew past analysts’ long-term forecasts.
A spokesman for Intel was not immediately available for comment.
Shares of Intel (INTC, Fortune 500) rose 4% in morning trading.
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