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Nicolas Puech says his wealth manager isolated him from friends and family and siphoned away a massive fortune. Then came the clue that began to reveal the deception.
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Nick Kostov
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Tag: Private Banking/Wealth Management
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Morgan Stanley earnings fall 10% but beat Wall Street expectations
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Morgan Stanley on Wednesday said its third-quarter profit fell 10% amid weakness in its investment banking business, but its trading and asset-management revenue rose.
Morgan Stanley
MS,
+2.03%
said profit for the three months ended Sept. 30 fell to $2.26 billion, or $1.38 a share, from $2.49 billion, or $1.47 a share, in the year-ago period.Analysts tracked by FactSet expect Morgan Stanley to earn $1.28 a share.
At the start of the quarter, analysts were expecting earnings of $1.58 a share.
Revenue fell 1% to $13.27 billion, ahead of the FactSet consensus estimate of $13.22 billion.
Morgan Stanley’s stock fell 2.8% in premarket trading on Wednesday.
Chief Executive James Gorman said the market environment was mixed.
“Our equity and fixed income businesses navigated markets well, and both wealth management and investment management producer higher revenues and profits year-over-year,” Gorman said.
Morgan Stanley’s stock fell 4.4% in the third quarter in a choppy period for bank stocks overall. Prior to Wednesday’s trades, the stock was down just under 10% in the past month, compared with 1.9% drop by the S&P 500
SPX.For the third quarter, trading revenue rose 10% in the quarter to $3.68 billion.
Asset-management revenue increased by 6% to $5.03 billion, while investment-banking revenue dropped 24% to $1.05 billion.
During the past month, 11 analysts cut their profit estimates for Morgan Stanley and only one increased their view.
UBS analyst Brennan Hawken downgraded Morgan Stanley to neutral from buy last week, cutting his price target to $84 from $110.
“Despite its successful transformation into a wealth-management-focused firm with a solid, wire house peer leading growth profile, MS is confronted with obstacles such as deposit sorting/yield seeking, intense competition for talent, and a challenging revenue environment,” Hawken said.
The average rating among 26 analysts that cover Morgan Stanley is overweight.
The bank is in the midst of a leadership transition, with Chief Executive James Gorman planning to step down by next May. Three potential successors at the bank include Andy Saperstein, who heads up wealth management; Ted Pick, who runs capital markets; and Dan Simkowitz, head of investment management.
Also read: Bank of America’s profit climbs 10%, boosted by interest rates and loans
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America’s Biggest Bank Is Everywhere—and It Isn’t Done Growing
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This copy is for your personal, non-commercial use only. Distribution and use of this material are governed by
our Subscriber Agreement and by copyright law. For non-personal use or to order multiple copies, please contact
Dow Jones Reprints at 1-800-843-0008 or visit www.djreprints.com.https://www.wsj.com/articles/americas-biggest-bank-is-everywhereand-it-isnt-done-growing-5ff18360
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Dow gains 450 points as U.S. stocks recover after 4 days of losses
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U.S. stocks recovered some ground on Friday, after four days of losses, as shares of regional banks rebounded and the main indexes received a boost from a strong April jobs and Apple’s better-than-forecast earnings.
What’s happening
On Thursday, the Dow Jones Industrial Average fell 287 points, or 0.86%, to 33,128. It remains on track for a 1.5% weekly drop.
What’s driving markets
In…
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PacWest stock plummets more than 50% after report of potential sale; other bank stocks fall too
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PacWest Bancorp PACW shares tumbled more than 50% in after-hours trading Wednesday, taking other bank stocks with it after a report that the company’s executives were weighing a possible sale.
The report, from Bloomberg News, adds to the concerns over the financial stability of regional banks, following the collapse in March of Silicon Valley Bank and Signature Bank, and the sale of First Republic Bank to JPMorgan Chase & Co. JPM this week. PacWest’s shares have been diving this week in the wake of First Republic’s collapse….
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How First Republic ended up as the second-largest bank takeover in history after Washington Mutual
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A quick rise in interest rates, a large amount of uninsured deposits and a first-quarter update that revealed further weaknesses in its business all contributed to the demise of First Republic Bank, now the second-largest bank blowup since Washington Mutual.
As of Dec. 31, First Republic FRC was ranked as the 14th largest bank in the U.S. by the Federal Reserve with consolidated assets of nearly $213 billion. Washington Mutual had $307 billion of assets as the largest bank failure in U.S. history during the global financial…
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JPMorgan to take over First Republic after fourth bank failure of the year
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JPMorgan Chase has won the auction to take over fallen First Republic Bank, the Federal Deposit Insurance Corp. announced early Monday morning.
The deal will see America’s largest bank JPM assume all the deposits and “substantially all the assets” of First Republic FRC, which became the fourth U.S. bank to fail this year.
“Our government invited…
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JPMorgan to take over First Republic after regional bank was closed
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JPMorgan Chase has won the auction to take over fallen First Republic Bank, the Federal Deposit Insurance Corp. announced early Monday morning.
The deal will see America’s largest bank JPM assume all the deposits and “substantially all the assets” of First Republic FRC.
The deal will see First Republic depositors — which include 11 leading…
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PacWest stock surges 15% as bank says deposits have been building in recent weeks
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Shares of PacWest Bancorp were shooting 15% higher in Tuesday’s aftermarket trading after the regional bank disclosed a rise in deposits in recent weeks.
PacWest PACW said alongside its first-quarter earnings report that total deposits rose to $28.2 billion as of March 31 from $27.1 billion when the company provided a March 20 investor update. The company saw deposit balances grow by an additional $700 million or so as of April 24.
The…
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Moody’s Downgrades 11 Regional Banks, Including Zions, U.S. Bank, Western Alliance
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Moody’s Downgrades 11 Regional Banks, Including Zions, U.S. Bank, Western Alliance
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14 dividend stocks yielding 4% or more that are expected to increase payouts in 2023 and 2024
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If you invest in dividend stocks, you are probably looking for long-term growth to go with the income. Otherwise you might be content to hold one-month U.S. Treasury bills, which yield 4.5% or park your money in an online savings account for a yield close to 4%.
Below is screen of stocks with current dividend yields ranging from 4.14% to 8.46%. What sets these apart from other stocks with high dividend yields is that their payout increases are expected to accelerate in 2023 and 2024 from those in 2022.
On Tuesday, S&P Dow Jones Indices said in a press release that it expected dividend payments by publicly traded U.S. companies to continue to hit record levels in 2023. But Howard Silverblatt, a senior index analyst with the firm, said that the pace of dividend increases in the first quarter had slowed and that he expected this year’s increases to be “at half the pace of the double-digit 2022 growth.”
Silverblatt also said current events in the banking industry were “expected to negatively impact future spending from both consumers and companies, which in turn may curtail corporate dividend growth.”
For many banks, there’s another big item on the table. A focus on share buybacks in recent years is very likely to end — this is a use of cash that can raise earnings per share if the share count is reduced, but there can be consequences, especially after a year of rising interest rates that pushed down the market value of banks’ investments in bonds.
In a note to clients on March 16, Dick Bove, a senior research analyst with Odeon Capital, predicted that stock repurchases in the banking industry would be “meaningfully cut back if not flat out eliminated.” He made three general points about buybacks in the banking industry:
- Buybacks remove working capital that would otherwise provide returns to a bank.
- Buybacks mean a bank’s board of directors is “in favor of flat-out giving capital away to investors that want nothing to do with the bank — they are selling its stock.”
- Buybacks do “nothing to increase bank stock prices – many bank stocks are selling at below their prices of five years ago.”
A company might find it much easier to curtail or stop buying back shares to preserve cash than it is to cut regular dividends. Preserving and increasing the dividend over time has been correlated with good performance for stocks over time. These articles provide examples of how dividend compounding is correlated with long-term growth as income streams build up:
- 14 dividend stocks that rose 100% or more in 5 years as the payouts doubled
- These 15 Dividend Aristocrat stocks have been the best income builders
Dividend stock screen
The S&P Dow Jones Indices report raises the question of which stocks might buck the trend.
Starting with the S&P 500
SPX,
-0.50% ,
there are 71 companies stocks with current dividend yields of at least 4.00% indicated by annual payout rates. Among these companies, 68 increased dividends during 2022, according to data provided by FactSet.Then we looked at the pace of dividend increases in 2022 and the consensus estimates for dividends paid during 2023 and 2024, among analysts polled by FactSet. Among the remaining 68 companies, there are 29 for which the estimated 2023 dividend increase is higher than the 2022 dividend increase. Narrowing further, there are 14 for which the estimated 2024 dividend increases are higher than the estimated 2023 dividend increases.
Here are the 14 stocks that passed the screen, sorted by current dividend yield:
Company Ticker Dividend yield Dividend increase – 2022 Expected dividend increase in 2023 Expected dividend increase in 2024 Altria Group Inc. MO,
+0.27% 8.46% 4.5% 4.7% 4.9% Newell Brands Inc. NWL,
-1.19% 7.55% 0.0% 0.1% 0.6% Boston Properties Inc. BXP,
-0.94% 7.42% 0.0% 0.7% 1.0% KeyCorp KEY,
-2.22% 6.99% 5.3% 6.7% 6.8% Prudential Financial Inc. PRU,
+0.17% 6.08% 4.3% 4.7% 4.8% ONEOK Inc. OKE,
+0.60% 5.87% 0.0% 2.2% 2.4% Healthpeak Properties Inc. PEAK,
-0.32% 5.54% 0.0% 2.1% 2.2% Dow Inc. DOW,
-0.53% 5.16% 0.0% 1.1% 2.2% Iron Mountain Inc. IRM,
-1.00% 4.70% 0.0% 1.8% 5.4% NRG Energy Inc. NRG,
+1.34% 4.50% 7.7% 7.9% 7.9% Franklin Resources Inc. BEN,
-0.58% 4.50% 3.6% 4.3% 5.7% Federal Realty Investment Trust FRT,
-0.53% 4.38% 0.9% 1.7% 2.1% Ventas Inc. VTR,
-0.57% 4.26% 0.0% 3.3% 5.5% Kraft Heinz Co. KHC,
+1.42% 4.14% 0.0% 0.7% 0.8% Source: FactSet Click on the ticker for more about each company.
Click here for Tomi Kilgore’s detailed guide to the wealth of information available for free on the MarketWatch quote page.
Any stock screen is limited, but can be useful as a starting point or supplement to your own research. If you see any companies of interest, do some research to form your own opinion of how likely they are to remain competitive over the next decade, at least.
Don’t miss: This stock ETF keeps beating the S&P 500 by selecting for quality
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How First Republic stock’s tailspin started and why it hasn’t stopped
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Shortly after Silicon Valley Bank disclosed on March 8 that it was running short of cash and needed to raise capital, First Republic Bank’s epic stock slide began.
The stock
FRC,
-15.47%
has lost 90% of its value in less than two weeks, hitting an all-time low of $12.18 a share on Monday.Supportive comments from Treasury Secretary Janet Yellen helped it snap back on Tuesday, but it’s hovering between positive and negative territory on Wednesday as investors await a key Federal Reserve decision on interest rates.
First Republic finds itself in a tough spot with a low share price and fresh debt downgrades and not even efforts to inject $30 billion into the company’s deposits in a scheme backed by JPMorgan Chase & Co.
JPM,
-2.58%
and a backstop from the U.S. Federal Reserve seem to be helping.The bank’s troubles stem from its overlap both in clientele and parts of its balance sheet with doomed Silicon Valley Bank, which is being sold off this week by the Federal Deposit Insurance Corp. after it officially failed on Friday, March 10. Silicon Valley Bank suffered a classic run on a bank, when depositors, nervous that it needed to raise capital, yanked their deposits.
First Republic has suffered the same deposit flight.
As a San Francisco bank with a focus on serving high-end clients, First Republic has acted as wealth manager for the greater Silicon Valley region of executives, managing directors and startup CEOs, as well as their counterparts on the East Coast.
The list incudes Facebook
META,
-1.16%
Founder Mark Zuckerberg, who has a large mortgage courtesy of First Republic, as the Wall Street Journal has reported. Few of its loans ever sour — it had $213 billion in assets at the end of 2022 and $176 billion in deposits.With its sophisticated lending products and access to the technology startup world, Silicon Valley Bank was also known for its a customer base from the venture capital and private equity world.
Also Read: 24 bank stocks that contrarian bottom-feeders can feast on now
Those well-heeled clients of both banks started running into problems as interest rates rose last year, pundits warned of an economic slowdown and investors switched to a risk-off strategy of conserving cash and containing costs.
The collapse of FTX and strain in the crypto world also fed the need for cold, hard government-backed currency. Rising interest rates made it more expensive to borrow and put a chill on the deal-making environment.
All of this and other factors led to a drain on deposits at Silicon Valley Bank and others as it faced “elevated client cash burn” at a rate that was double pre-2021 levels, even as venture capital and private equity funds were slowing down their capital raising activities, the company said in an ill-fated mid-quarter report.
On March 8 after the market close, Silicon Valley Bank said it planned to sell $2.25 billion in common stock and a type of preferred stock, with one of its major clients, private equity firm General Atlantic, in line to buy $500 million worth. Goldman Sachs Group Inc.
GS,
-1.14%
was handling the deal.The company also disclosed that it had lost $1.8 billion on the sale of $21 billion in available-for-sale securities on its balance sheet to cover deposit withdrawals.
It was this last part that caused big trouble for First Republic. Not only did its clientele overlap with Silicon Valley Bank, its holdings included some of the same securities that Silicon Valley Bank sold at a loss.
Wall Street investors quickly started bidding down shares of First Republic and other regional banks and the credit rating agencies moved in, cutting the bank’s rating from investment grade deep into junk in just a few days.
None of this helped First Republic hold on to its deposits.
As one longtime banking official said recently, money from Silicon Valley types typically comes in the form of uninsured deposits, which means they’re in excess of the $250,000 that the FDIC will guarantee if a bank goes out of business. This so called hot-money is great for banks when times are good, but can move away quickly if the environment changes.
“When hot money gets nervous, it runs,” former FDIC chairman Bill Isaac told MarketWatch recently.
While an unprecedented effort on March 16 by 11 banks to inject $30 billion into First Republic’s deposits temporarily provided a lift to its stock, the move apparently wasn’t enough.
First Republic said last Thursday that it had borrowed between $20 billion and $109 billion from the Federal Reserve during that week. It also increased short-term borrowing from the Federal Home Loan Bank by $10 billion at a rate of 5.09%.
Jefferies analyst Ken Usdin said the numbers revealed that First Republic’s total deposits had dropped by up to $89 billion in the week ended March 17 past week—or about three times more than the $30 billion injection from the bank.
“With [First Republic’s] earnings profile clearly impaired, the new deposits effectively bridge the estimated $30.5 billion of uninsured deposits still on [the bank’s] balance sheet, providing time for [it] to likely explore a sale,” Usdin said.
Janney Montgomery Scott analyst Tim Coffey said First Republic’s stock drop in recent days reflects uncertainty around what a potential second bailout would look like, or how the bank’s balance sheet is faring after a steep run in deposits and the falling value of its long-dated securities.
Another unknown is the company’s latest Tier 1 capital Ratio, a key measure of a bank’s balance sheet strength.
Like Silicon Valley Bank, First Republic’s balance sheet has had more than the usual exposure to long-dated securities, which have been falling in value as interest rates rise.
A typical mix for a bank of comparable size is to hold about 72% of securities as available for sale. The remaining 28% are held to maturity. First Republic’s mix is reversed with 12% available for sale and 88% held to maturity.
The bank’s mix of longer-dated assets now commands a lower market value, given where interest rates are. The bank’s emphasis on long-dated securities provided a better return when interest rates were near zero, but they have been a liability in the current environment.
“They’ve had duration risk where the value of their securities started going down as interest rates rose,” Coffey told MarketWatch.
Another problem for First Republic is that many of those long-dated securities are in the mortgage business, which has been ailing as interest rates rise.
Plenty of questions remain about First Republic’s situation and whether it could have been avoided. The challenges facing First Republic as well as the demise of Silicon Valley Bank and Signature Bank will be the focus of hearings on Capitol Hill next week.
Wall Street is also awaiting comments from the U.S. Federal Reserve when it updates its interest rate policy later on Wednesday.
And JPMorgan Chase continues to work with First Republic on a potential bailout, even as the bank has reportedly hired Lazard
LAZ,
-2.17%
to weigh strategic alternatives.All of these factors add to the uncertainty swirling around First Republic, giving investors little reason to go long on the stock for now.
Also Read: 24 bank stocks that contrarian bottom-feeders can feast on now
Related: Senate Banking Chair Sherrod Brown sees bipartisan support for changes to deposit insurance
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First Republic stock tumbles after hours as bank reportedly hires more advisers
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Shares of First Republic Bank dropped about 15% in the extended session Tuesday after news that the troubled bank reportedly has hired advisers to review its options and manage the crisis.
First Republic
FRC,
+29.47%
stock rallied 30% in the regular trading day Tuesday, buoyed by reports that JPMorgan Chase & Co.
JPM,
+2.68%
was working to help bolster the bank’s capital.The Wall Street Journal reported late Tuesday that First Republic had tapped Lazard to help it review its options, and consultant McKinsey for post-crisis planning, citing people familiar with the matter. Options on the table include a sale, a capital infusion and asset sales, the sources said, according to the Journal.
Separately, Reuters reported Tuesday that the bank could downsize if a capital raise fails, and Bloomberg reported First Republic may rely on government backing to facilitate a deal to shore it up.
The bank issued “a message to our clients” late Tuesday, as its stock was falling in after-hours trading, that noted recent “unprecedented events,” and promised an update.
“Our commitment to client service is unchanged, and we remain well-positioned to continue to manage deposit activity,” the statement reads. “Today, as every day, we are processing transactions, opening accounts, funding loans, answering questions, and serving clients’ overall banking and wealth management needs.”
First Republic stock has swung wildly in recent days, ending Monday’s session at a record low, and several trade halts plagued it during the day.
San Francisco-based First Republic last week got $30 billion in deposits from 11 major U.S. banks, but the stock promptly resumed its slide as it suspended its dividend to preserve cash.
That followed the collapse of Silicon Valley Bank and Signature Bank earlier this month and contagion fears that have rocked bank stocks.
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What’s Going on With First Republic Bank?
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First Republic Bank shares have been hit hard over the past week following the failures of two large U.S. regional banks,
Silicon Valley Bank and Signature Bank. On Thursday, shares of the bank and many other financial firms rallied after the biggest banks in the U.S. swooped in to rescue the San Francisco lender. Under the plan, 11 banks including JPMorgan Chase & Co. placed $30 billion in deposits at First Republic, using their own funds, confirming an earlier report by The Wall Street Journal.But Friday, shares of First Republic dropped anew, sinking more than 30% and leaving analysts to wonder whether it has a future as a stand-alone bank.
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First Republic Bank’s debt cut to junk by Moody’s
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Moody’s Investors Service downgraded its credit rating on First Republic Bank to junk late Friday, citing a “deterioration in the bank’s financial profile.”
First Republic’s
FRC,
-32.80%
debt rating was cut to B2 from Baa1, Moody’s said. Fitch Ratings and S&P Global Ratings downgraded First Republic Bank’s debt earlier this week.The downgrade reflects “the deterioration in the bank’s financial profile and the significant challenges First Republic Bank faces over the medium term in light of its increased reliance on short-term and higher cost wholesale funding due to deposit outflows,” Moody’s analysts said in a release.
They cited various recent developments with First Republic, including the company’s Thursday disclosure that over the previous week its Federal Reserve borrowings ranged from $20 billion to $109 billion. Also Thursday, the bank received a $30 billion deposit infusion from 11 major U.S. banks.
“Moody’s believes the high cost of these borrowings, combined with the high proportion of fixed rate assets at the bank, is likely to have a large negative impact on First Republic’s core profitability in coming quarters,” the analysts said. “In addition, the rating agency noted that while the news of the banking consortium’s deposits is positive in the short-run, the longer-run path for the bank back to sustained profitability remains uncertain.”
First Republic is reportedly looking to raise money from other banks or private-equity firms by selling additional shares, according to the New York Times.
Shares of the company have plunged 80% from the close of trading on March 8, just before Silicon Valley Bank spooked investors with an update on its business and a planned stock sale. First Republic lost 33% in Friday’s session despite the deposit arrangement with the large banks. Shares were down another 6% in the extended session Friday.
Moody’s said its outlook was maintained at “rating under review.” That review for downgrade, it said, “reflects the continuing challenges to the bank’s medium-term credit profile in light of its significantly eroded deposit base, increased reliance on short-term wholesale funding and sizeable volume of unrealized losses on its investment securities.”
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