Regional banks ready to drink 'Fed-Ade'
Wake up and good morning. Now that nine monster banks have received federal aid in the form of $125-billion capital injections from the U.S. Treasury, it's the regional banks' turn. Who are the lucky recipients? We may find out today. SunTrust said it will apply to sell up to$4.9-billion in preferred shares to the U.S. Treasury, Bloomberg News reports, joining regional lenders including KeyCorp and Regions Financial Corp. that want to participate in the (overall) $250-billion program to recapitalize banks. The world's biggest financial firms have recorded losses of $657-billion tied to the global credit crunch and raised $640-billion to replenish capital. "We are in a position of strength and we do not have a deep need for this capital," SunTrust CEO James Wells said during a conference call. "However, given the level of economic uncertainty, it may be prudent to pursue this option, particularly since the preferred stock is attractively priced.'' Not to mention the banking company's weak earnings out this week and high exposure to troubled loans in -- where else? -- Florida.
Say it ain't so, AIG. The insurance company says it wants more money from the seemingly bottomless wallet of federal taxpayers. It's already blown through $90.3-billion of a U.S. government credit line since it was bailed out last month, an amount that exceeds the size of the original loan meant to save the insurer. And AIG may need more than the $122.8-billion now available to the New York-based insurer, says AIG CEO Edward Liddy. "This emphasizes the uncertainty for anyone trying to put a number'' on AIG's cash needs, Bill Bergman, an analyst at Morningstar Inc. in Chicago is quoted saying. His summary, and I wholeheartedly concur? The financial-products unit that caused most of the firm's losses (my emphasis here) "IS A BIG BLACK HOLE."
Okay readers, what should AIG do? Maybe the senior execs should (A) run back down to California's St. Regis Resort at Monarch Beach to confab, de-stress and drop another $443,000 on suites, pedicures and massages (all post federal bailout) or (B) take another round of private jets and limos to Plumber Manor (note: Joe The Plumber was not there), the 17th-century country house in scenic Dorset, southwest of London, and spend another $86,000 on a partridge hunt. (This hunting trip came the same week AIG got a second bailout loan of $37.5-billion.) Next time, let's send them hunting with Dick Cheney.
A revealing exchange between bank analyst Nancy Bush and the executives at Georgia-based Synovus Financial Corp. took place this week during an earnings conference call. Here's the complete transcript. Synovus, which is prominent in the Tampa Bay area, acknowledged it had taken a big hit on loans to an auto dealership. Nancy Bush asked: Is this the Bill Heard dealerships, which closed suddenly not long ago? Well, the execs would not confirm but then described the dealership down to the lug nut. Hey, if it walks like a duck... Here's how Mark Holladay, Synovus' chief risk officer, responded to Bush:
"That loan was $53-million. That particular dealer had locations in the southwest and the southeast. And really what happened there is their locations in Las Vegas and Scottsdale, Arizona, and Orlando, Florida were the issues that created their problems. We've charged off about $3.2-million on that credit. We have assets located here and in Atlanta and other personal assets we do believe that, that credit can be reduced at about a $20-million level in the next quarter."
Speaking of auto lenders, here's a local Tampa Bay firm that's taken it on the chin repeatedly. Clearwater's Nicholas Financial Inc., which specializes in financing used cars, has watched its shares shrink from over $8 to under $3 this year. But here's one outlook about the company's future -- for the patient investor -- that's pretty positive.
A new baseball stadium by 2011? So says a report this week. It's just not a stadium for the World Series-playing, American League Champion Tampa Bay Rays. It's for the Florida Marlins. While the economy may be tanking, Major League Baseball remains hopeful the Marlins will get their new digs."While everyone is concerned about the economy, I'm confident that the way they've structured this deal, we can go forward," MLB President Bob DuPuy said before the World Series opened Wednesday, even as a recent Wall Street Journal article raised concerns about the deal's feasibility amid a widening financial crisis, severe credit crunch and a drop in the market for stadium naming rights.
Also addressing baseball-in-hard-economic times is Major League Baseball Commissioner Bud Selig in a Boston Globe story headlined "Golden Age in Tampa." Said Selig:
"The national economy is going to have an effect on everything. There's no sense in me trying to figure it out. It's going to have a pervasive effect on everything we do and on all of our lives. I don't think there's any doubt about that. We've got all offseason to [prepare for it]. It will be the subject of several of our meetings."
Bottom line? The remarkable success of the Rays -- World Series victory or not -- will still not translate to big financial gains -- more season tickets, yes, but a new stadium? -- any time soon.
-- Robert Trigaux, Times Business Columnist