The Market shouts BUY, BUY, BUY
As FED wait for more evidences of solid economic growth
Expect Market to go fly today with high chances of breaking the heavy resistance level which also breaks the down trend that currently loom our market
SM Group is rumored to acquire another bank
which one is it kaya? Is it really merger with LTG’s PNB?
Meanwhile China bank acquired Planters Bank for undisclosed amount
For clarification regarding the SM rumor, it is Chinabank acquiring Planters Bank
The accounting shift is known as moving assets from “available-for-sale” treatment to “held-to-maturity,” a change that has been underway for several years.
US commercial banks’ held-to-maturity books increased 62% to $347.4 billion in the second quarter from $215 billion in the fourth quarter of 2010, according to SNL Financial.
As bond markets weakened in the second quarter, the switch accelerated, with held-to-maturity accounts rising 8.7% from the first quarter. It was the biggest increase in nearly two years.
One of the first big banks to make the shift was US Bancorp of Minneapolis, Minnesota, the sixth-largest US bank, with $353.4 billion in assets. The bank is a favorite of Warren Buffett, whose Berkshire Hathaway Inc. is one of its biggest shareholders.
US Bancorp’s held-to-maturity securities book ballooned to $34.7 billion in the second quarter, or 46% of its investment portfolio, from just $1.5 billion at the end of 2010, with most of the change coming in 2011.
But the bank is now saddled with tens of billions of dollars in low-yielding assets. The weighted average yield on US Bancorp’s held-to-maturity portfolio was 1.89% in the second quarter of 2013, compared with 2.72% for the available-for-sale portfolio.
As rates start to rise, the bank could earn less on some assets than it has to pay to fund itself, cutting into its income.
To be sure, banks have some ways to mitigate that pain. For example, they can borrow against the held-to-maturity assets and invest the proceeds. And many bank loans carry floating rates, so rising rates will boost interest income.
But banks that go too far with a held-to-maturity strategy will not be able to free up as much of their balance sheet to make new loans if the economy improve in the coming months, said Johannes Palsson, managing director at Angel Oak Advisory, a risk management consulting firm.
Those banks are “kind of stuck. There’s not much you can do” to take advantage of future loan growth, Mr. Palsson said.
For available-for-sale assets, banks must record paper losses each quarter when the securities’ values fall. The paper losses do not hit earnings but reduce net worth, as measured by the book value of assets minus liabilities.
That happened to banks in the second quarter, when bond markets weakened amid talk of the US Federal Reserve cutting back on its bond buying program.
The $38 billion of unrealized investment gains they had reported at the start of the year swung to $13.1 billion of paper losses by the end of August, according to Fed data.
For a long time, regulators ignored changes in the value of available-for-sale books when assessing a bank’s capital strength.
But under the international framework known as Basel III, losses from available-for-sale assets will hit regulatory capital, and a bond market selloff could force US banks to boost their capital levels.
Paper losses on held-to-maturity securities, however, would not subtract from banks’ capital levels.
This, along with new liquidity rules that pressured banks to increase their securities holdings, encouraged banks to park assets in their held-to-maturity bucket of their investment portfolios. — Reuters
Waiting for FED Tapering announcement
(BEL and MER to be replaced by LTG and GTCAP
Market may be seen trading low or consolidating in its range as investors are waiting for the outcome of the FED Tapering this week
It seems that we will have some light trades as most traders and investors are on a waiting mode
either wait to buy or to sell
Althou Philippine fundamentals are really good
it would be high likely that we will be dragged by other emerging markets as we are seen just as one basket
on the other hand
there are still a lot of issues (Zamboanga Seige, Pork barrel scam) for the Philippines to face which hinder its continues growth and stops the momentum that might be forming due to it giving doubts on the Philippine governance which is very vital to investors
Just be reminded that there will be a buying pressure for stocks that would be included in the index market and a selling pressure on those which would be remove, the pressure mostly be due to more cash inflow for those that would be added as Funds who could not trade them due to limitations may now trade them as they are already in the index
at any rate be on watch… a lot of issues might just be seen into light this week