For Immediate Release
Chicago, IL – October 19, 2009 – Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include: Google Inc. (GOOG), Bank of America Corporation (BAC), American International Group (AIG), Citigroup (C) and GMAC Inc. (GJM).
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Here are highlights from Friday’s AnalystBlog:
Google Stuns the Market
Google Inc. (GOOG) reported third quarter results that blew away all estimates. Earnings beat the Zacks Consensus Estimate by a dollar and 20 cents. Revenue beat the consensus by around 40%.
Revenue
Gross revenue of $5.94 billion was up 7.6% sequentially and 7.3% year over year. Management stated that strength was broad-based, with all served markets showing signs of exiting the recession.
Traffic continues to improve, with traffic acquisition cost (the portion of revenue shared with Google’s partners) increasing 7.7% sequentially. However, traffic acquisition cost as a percentage of total advertising revenue was down 15 basis points. Net revenue, excluding traffic acquisition cost was flattish sequentially (down 0.6%).
Bank of America Disappoints
Bank of America Corporation’s (BAC) third quarter 2009 loss came in at 26 cents per share, substantially worse than the Zacks Consensus Estimated loss of 10 cents. This compares unfavorably with earnings of 15 cents in the prior-year quarter.
The worse-than-expected results came in due primarily to continued weakness in the U.S. and global economies as well as stress on the consumer, which continues to result in high credit costs. The results for the quarter were negatively impacted by $2.6 billion in pretax mark-to-market and credit valuation adjustments on certain liabilities, including the Merrill Lynch structured notes, and a $402 million pretax charge to pay the U.S. government for termination of its asset guarantee term sheet. However, strengthening reserves, capital position and liquidity were key positives during the quarter.
The results for the quarter exclude total preferred dividends of $1.2 billion. The preferred dividend paid to the U.S. government was $893 million. Net loss available to common shareholders was $2.2 billion, compared to earnings of $704 million in the prior-year quarter.
Fully taxable-equivalent revenue net of interest expense was $26.4 billion, up 32% from $19.9 billion in the prior-year quarter.
Net interest income on a fully taxable-equivalent basis was $11.8 billion, down from $10.9 billion in the year-ago quarter. The year-over-year decline was a result of securities sales and lower loan levels. The decrease was partially offset by a favorable rate environment, the addition of Merrill Lynch and higher deposit levels.
Net interest yield decreased 32 basis points (bps) year-over-year to 2.61%. The decrease was a result of the addition of lower yielding assets from Merrill Lynch.
Non-interest income almost doubled to $14.6 billion from $8.0 billion in the prior-year quarter. This increase is attributable to higher trading account profits, investment and brokerage services fees and investment banking income following the addition of Merrill Lynch. These increases were partially offset by $1.8 billion in losses related to mark-to-market adjustments related to the Merrill Lynch acquisition and $714 million in credit valuation adjustments on derivative liabilities.
Non-interest expense increased to $16.3 billion from $11.7 billion in the prior-year quarter. The increase in non-interest income reflects higher personnel and general operating expenses, driven partially by the recent acquisition of Merrill Lynch. The increase also due to a $402 million pretax charge related to the termination of its asset guarantee term sheet.
The efficiency ratio on a fully taxable-equivalent basis was 61.84% compared to 58.60% in the prior-year quarter. Book value per share of common stock was $22.99, compared with $30.01 at Sept. 30, 2008.
Credit quality significantly deteriorated during the quarter. Though the provision for credit losses decreased 12.5% sequentially to $11.7 billion, on a year-over-year basis it increased 81.5%. Nonperforming assets increased to $33.8 billion from $31.0 billion at June 30, 2009, reflecting a slower rate of increase than in recent quarters as a result of some early signs of economic recovery. Net charge-offs increased 10.6% sequentially to $9.6 billion. Net charge-off ratio deteriorated 49 bps sequentially to 4.13% and nonperforming assets ratio deteriorated 41 bps sequentially to 3.72%.
During the reported quarter, the company’s Tier 1 capital ratio improved to 12.46% from 11.93% in the prior quarter and 7.55% in the prior-year quarter. Tier 1 common ratio improved to 7.25% from 6.90% in the prior quarter and 4.23% in the prior-year quarter.
The U.S. pay czar Kenneth Feinberg revealed yesterday that Ken Lewis, who intends to retire as chief executive of BofA at the end of this year, will receive no pay or bonus for 2009. However, Lewis will still have $53 million in pension benefits along with other stock awards and deferred compensation of $69 million as Feinberg does not have the authority to modify compensation awarded before 2009.
Feinberg is in charge of deciding compensation packages for the highest- paid employees at all the firms that received bailout money. For seven firms the situation is critical, as these firms received substantial support from the Troubled Asset Relief Program (TARP).
The seven firms whose compensation plans are under scrutiny are American International Group (AIG), Citigroup (C), Bank of America, Chrysler Financial, Chrysler Group LLC, General Motors and GMAC Inc. (GJM).
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