Tuesday, July 27, 2010

Goldman's latest

GS Americas Morning 0727 -


Anonymous said...

why do you see BAC doubling?

Palmoni said...

From Morgan Stanley this am

Impact on our views: Agreed changes to Basel
proposal are less strict than initial ask, as the Committee
continues its push to deliver a final version ahead of the
Nov G20 meeting. The big unknown remains the
minimum requirement for common tier 1, which we
anticipate will be announced by November 12. Several
expected changes came through (more realistic deposit
runoff scenarios, agency paper included in definitions of
liquid assets, probability of commitments to be drawn
down rather than entire line, etc.). Implementation of
today’s proposals may cause banks to accelerate
reserve release to reduce DTA, freeing up allowed room
for MSRs and holdings in unconsolidated financial
What's new: Today the Basel Committee announced
several watered down changes to the Basel III proposal,
in their continued effort to reach consensus ahead of the
Nov G20 meeting. New rules would allow for MSRs,
DTAs, and minority interest to separately represent up to
10% of common tier 1, not to exceed 15% in the
aggregate (initial proposal suggested full exclusion).
We estimate the impact on CT1 for our banks based on
the broad strokes of today’s announcement. We expect
DTAs will largely diminish for our group by the time the
new policy is implemented in 1Q13. We will continue to
refine these estimates as more details are announced.
Investment thesis: We have an Attractive view on large
cap banks expecting two key drivers over the next 12-18
months: declining credit losses and increasing capital
management (higher dividends/buybacks) driving up
EPS. Top picks are early cycle consumer credit stocks
(BAC, JPM), restructuring stocks (WFC, PNC)

Sam said...

Thanks, Palmoni for the Goldman stuff.