Bank Of America Still Facing Hurdles

Bank of America has been getting some better news lately, but the company isn’t out of the woods just yet. As the company proved recently, there are still many challenges in their core US operations mainly related to consumer and business credit quality.

In the quarter ended June 30, BAC announced they lost $255 million from their North American operations.

The company would have lost money globally, if not for a $3.5 billion after-tax gain fromits sale of part of China Construction Bank Corp.

With that gain included, total global profits were $3.43 billion. Bank of America has been adding to its loan loss reserves. In the second quarter they added $13.38 billion. They expect that consumer and business loan losses will continue to rise, at least in the immediate long term.

Bank of America is in the same boat as their rivals. They are attempting to build up their operations despite the fact that the consumer and business cash cow customers are hurting.

Without these one-time gains, the company admitted they would have a tough time making money in 2009.

“Profitability in the second half of the year will be much tougher than the first half,” said CEO Kenneth Lewis.

For the quarter, Bank of America did $32.77 billion in revenue, including Merrily Lynch.

Right now Bank of America seems to be recovering nicely from their troubles, but impressive profits are still in the distance.

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Cash For Clunkers Stimulates Auto Sales

Cash For Clunkers, a government program designed to take older, less fuel efficient vehicles off the road and replace them with brand new, more efficient autos has worked. The program, which offers up to $4,500.00 in rebates to consumers that own qualified trade-ins, has spurred auto sales across the nation.

This is obvious, even to the casual observer. The car lots in my local neighborhood have less stock on the showroom floor, and a few more cars seem to be gone everyday.

The “Cash For Clunkers” program has already exhausted 1 billion dollars and the Senate is expected to vote for an additional 2 billion dollars in funding for the program.

Ford Motor Company (NYSE:F) recently reported improved sales, with this new program partly responsible. Ford stock is currently trading for $8.21 a share.

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AMD Not Expected To Top Intel Earnings

AMD is a distant second in the cpu business and their newest earnings report is expected to show that.

Even though market leader Intel announced better than expected numbers for the quarter, the industry is still in the midst of a slump. AMD is expected to announce earnings Tuesday after market close

ANALYST TAKE: Intel’s better-than-expected numbers won’t necessarily translate into strong results for AMD, warned Martin Reynolds, a vice president and research fellow at Gartner Inc.

“The challenge is, it’s hard to tell how much of that is the market or possibly Intel gaining some share,” Reynolds said. “I don’t know that we would see a disaster from AMD, which is what you’d expect to see if they didn’t have these new products out there … Don’t expect anything spectacular from AMD, in either direction.”

AMD has lost billions of dollars in the last two years.

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David Kellermann – Acting CFO For Freddie Mac Found Dead Of Apparent Suicide

David Kellermann, the acting CFO for the mortgage company Freddie Mac (NYSE:FRE) was found dead at his Reston, Virginia area home today.

It’s believed that the 41 year old chief financial financial officer committed suicide by way of hanging. No signs of foul play were found.

Kellermann began his career with the company in 1992 as an analyst/advisor and moved up the corporate ladder during his years with the company. Kellerman was appointed as acting CFO and senior vice President after Anthony Piszel resigned from his position in September 2008.

Executives of the troubled mortgage company have recently been under investigation by the SEC and the Justice department for accounting practices that played a part in the current real estate and economic crisis.

David Kellermann served on the board of directors for Coalition for the Homeless.

A statement was issued by John Koskinen, Freddie Mac’s interim CEO reads:

David was a man of great talents. He dedicated those talents to Freddie Mac for more than 16 years, serving in many business and finance capacities before recently taking the reins as acting chief financial officer. His extraordinary work ethic and integrity inspired all who worked with him. But he will be most remembered for his affability, his personal warmth, his sense of humor and his quick wit. David was a friend to many in the Freddie Mac family, and we mourn his passing.

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Citigroup News

Board members are nervous as the US government will soon become the largest shareholder of the New York City banking giant Citigroup (NYSE:C). They have a right to be nervous, considering the type of performance the company has been turning in for the last few quarters. In the most recent quarter, C announced a $1.59 billion first-quarter profit. However, that profit came before payments of preferred dividends to the U.S. Treasury. Despite making what appeared to be an operational profit, the company still owes the government a very hefty sum of money.

“I intend to see this through,” Citigroup CEO Vikiram Pandit said at today’s annual shareholder’s meeting. He also said Citigroup would “repay every penny” of the money they borrowed from the government.

Shareholders are expected to vote on 4 four new additions to the board. They are also expected to vote on several other members, causing a major re-shuffling of the board. The board picks are not without controversy as several large shareholder groups are unhappy with the board’s performance.

Despite the profit announcement, Citigroup really isn’t performing that well.

“Citigroup results included several one-time items (widening debt spreads, the sale of Redecard and accounting changes) which muddied the waters in assessing the franchises underlying performance,” wrote Goldman Sachs (NYSE:GS) analysts Richard Ramsden and Brian Foran on April 19.

The analysts went on to say that Citigroup is still having major problems with credit quality and that doesn’t look to change in coming months.

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Yahoo Announces Layoffs

New CEO Carol Bartz is not timid about wielding her axe to cut costs at former internet high-flyer Yahoo. The cuts are expected to be announced next Tuesday, when YHOO also releases earnings for the first quarter of 2009. According to the New York Times, several hundred jobs are expected to be snipped.

Yahoo has already cut around 2,400 jobs in the last two years as their market share declined in light of increased competition from Google. There are now slightly more than 13,000 employees at Yahoo.

Yahoo has really lost ground in the display-ad business as advertisers switched to different ad networks, in particular to Google. Yahoo, like many online giants, has decreased the price of ads in the face of diminishing demand.

Google is also expected to announce an erosion in sales revenue, although it’s not likely to be as dramatic as it was for Yahoo.

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Ezra Merkin Charged With Fraud

In a move that shouldn’t surprise many, J. Ezra Merkin, the former chairman of GMAC, famed NYC philanthropist, and hedge fund manager has been charged with fraud for his connection in the Bernard Madoff Ponzi scheme.

New York Attorney General Andrew Cuomo charged Merkin with civil fraud for steering many of his clients to invest with Madoff. According the the charges, Merkin steered $2.4 billion of his client’s funds to Madoff, all the while ignoring “glaring red flags” that should have told him the investments weren’t safe. For his part, Merkin earned $470 million in incentive and management fees.

“Merkin duped individual investors, non-profits, and charities into believing he was responsibly managing their investments, when in actuality he was dumping them into history’s largest Ponzi scheme,” Cuomo stated at a press conference.

Merkin, 55, has denied wrongdoing. He said he was “absolutely shocked” to learn about Madoff’s scheme. His lawyer, Andrew Levander, said he would “vigorously defend” his client against court action.

Merkin is already being sued by New York University and Mort Zuckerman over his role in the scheme.

Ezra Merkin ran both the Gabriel Capital and Ariel Fund, which have been shut down. Both are now said to have operated as “feeder funds” that solicited funds for Madoff in return for large fees. Cuomo alleged that Merkin presented himself to clients as an “investing guru” but was only a “master marketer.” Cuomo’s written statement that accompanied the charges went so far as to say that Merkin realized professional investors were questioning “Madoff’s uncommonly steady returns, there were fundamental questions about Madoff’s money management business that suggested fraud.”

Cuomo stated that Merkin had two articles that questioned Madoff’s investments in his files.

Levander said that Merkin had done his due diligence, and found nothing untoward about Madoff.

“Unfortunately, Mr. Merkin’s due diligence, just like the detailed investigations performed by countless others, including regulators, was thwarted by the intricate, fraudulent scheme perpetrated by Madoff,” he said.

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Coca-Cola China Juice Deal Shot Down

The Chinese government has ruled against a $2.4 billion takeover of local juice giant Huiyuan Juice.

China’s Ministry of Commerce decided against the deal, saying it would limit Chinese consumer choice. The deal would have been the largest ever takeover of a Chinese company.

“We are disappointed, but we also respect the MOC’s decision,” said Muhtar Kent, president and chief executive officer of Coca-Cola.

Kent further stated that Coca-Cola had a long term interest in the Chinese market and would work along those lines. The decision could prove significant on several fronts.

The case was the first test of China’s anti-monopoly law. It also shows investors that China may be taking a protectionist attitude towards trade, despite proclamations to the contrary.

Certainly it could cause direct foreign investment in China to dwindle, if companies perceive the market as difficult to operate in. The ruling said that the Coca-Cola deal might help “squeeze out” smaller players in the juice market. Of course that will also be likely in the event of increased competition by any number of foreign players.

Coca-Cola had already planned on spending $2 billion in China in the next three years, in addition to the juice deal.

Some in China are worried that Chinese companies will now have a hard time engineering takeovers of foreign companies as a result of the decision.

“The issue will likely give other countries an excuse to reject China’s investments overseas. Though it seems that the decision can protect the domestic industry in the short term, for Chinese companies looking for overseas expansion, they may lose the best timing and prices to acquire assets,” said TX Investment Consulting Co analyst Shi Jiangang.

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Prosecutors Look To Seize Bernard Madoff’s Remaining Assets

Prosecutors in the case against Bernard Madoff are seeking to seize his and wife, Ruth’s, remaining assets after the 70 year old “investor” plead guilty to 11 criminal charges associated with his large scale Ponzi scheme on March 12, 2009.

According to a document filed at the U.S. District Court in Manhattan, US Prosecutors are seeking the forfeiture of Madoff’s homes, cars, boats, securities, silverware and a piano that were believed to be paid for with gains from his illegal business activities.

Bernard Madoff is accused of swindling as much as $65 billion dollars from numerous investors. His scheme didn’t discriminate – he took from actors, charitable organizations and Holocaust survivors.

Madoff took new investment dollars to pay off earlier investors. When the credit market imploded and Madoff couldn’t tap into new money to cover the withdrawal requests of his clients, his fraudulent investment company came undone.

Madoff was denied bail and is currently in jail awaiting sentencing, scheduled to take place on June 16, 2009.

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Citigroup Hit By Terrorism, Man In Street Cheers

Just how unpopular is Citigroup these days? The company was the victim of two bombing attacks engineered by a Greek terrorist group that blamed them for causing the international banking crisis. Apparently the Revolutionary Struggle of Greece is not alone in their hatred of Citigroup, a company that’s been deemed ‘too big to fail’ by the US government.

On web discussion group Yahoo Buzz, the comments about Citigroup (NYSE:C) were scathing.

One by “castlewall” was typical: “Look out Citibank, as crooks your days are numbered unless you all sit down and think of all the money you have stolen for yourselves to pay out bonuses,” the message said.

Shadegrown was outspoken in his support of the terrorist group. “Not at all surprising, as Citibank can be construed as the face of significant greed and indifference to others. Well deserved, I would add. Thank God no one got hurt or killed. Bravo,” he wrote.

When the average web surfer cheers for your offices to be blown to smithereens, it’s safe to say as a company you’ve developed an image problem.

It’s easy to understand where all the antipathy towards Citigroup comes from. On so many levels the company is emblematic of the entire financial crisis that currently grips the world. Their continuous miscues and common misdeeds in the pursuit of profit are legendary. Their hunger to dine at the public trough is unprescedented. All of their corporate shortcomings have resulted in a company that elicits reactions such as this one when they’re bombed by terrorists.

“I thought the Upper Management of Citi bank were all terrorists,” said papanielsen.

Ouch. Yep, it looks like Citigroup has a real image problem.

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