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: Cognizant (CTSH), UBS AG (UBS), Infosys Technologies Ltd (INFY), Repsol YPF S.A. (REP) and Eni S.p.A. (E).

Get the most recent insight from Zacks Equity Research with the free Profit from the Pros newsletter: http://at.zacks.com/?id=5513

Here are highlights from Friday’s AnalystBlog:

Cognizant Buys UBS ISC

Cognizant (CTSH) recently announced a definitive agreement to acquire UBS India Service Centre Private Limited for about $75 million. Based in India, UBS ISC is a captive service provider to UBS AG (UBS) and currently employs 2,000 associates.

Headquartered in Zurich and Basel, Switzerland, UBS AG is a global firm providing services to private, corporate and institutional clients. New Jersey-based Cognizant is a leading provider of consulting, technology and business process outsourcing (BPO) services.

The transaction is expected to close by the end of 2009. As part of the transaction, UBS and Cognizant have entered into a multi-year service agreement under which Cognizant will provide a range of business process outsourcing (BPO), knowledge process outsourcing (KPO), IT, and remote infrastructure management services to UBS divisions around the globe. Cognizant aims to help these divisions to reduce time-to-market, expand service delivery, and improve productivity, operational efficiency and quality.

UBS is a leader in wealth management, investment banking, asset management, research and remote IT infrastructure management. Management at Cognizant believes that this acquisition will help Cognizant strengthen its business and knowledge process capabilities, deepen its financial services domain knowledge, and improve its capabilities to provide integrated services across consulting, technology, and outsourcing.

Cognizant continues to outperform its peers and remains a leader in IT services. Compared to its competitors Tata Consultancy Services Ltd and Infosys Technologies Ltd (INFY), CTSH is setting a more robust tone going forward.

Repsol Confirms Gas in Venezuela

Following the test on recently found gas resource in the shallow waters of the Gulf of Venezuela, Repsol YPF S.A. (REP) confirmed reserves of between 5.6 trillion and 7.8 trillion cubic feet of gas. With an estimated area of 33 square kilometers, it is the country’s largest discovery.

Repsol (32.5% interest) partners with Italy's Eni S.p.A. (E – 32.5%) and Venezuela's state-owned oil company Petroleos de Venezuela SA (35%) for future production on this resource.

While Venezuela aims to increase natural gas output to overcome the current deficit, Repsol wants to boost oil and gas production through new discoveries off the coasts of Brazil and Venezuela after four years of declining output.

Want more from Zacks Equity Research? Subscribe to the free Profit from the Pros newsletter: http://at.zacks.com/?id=5515.

About Zacks Equity Research

Zacks Equity Research provides the best of quantitative and qualitative analysis to help investors know what stocks to buy and which to sell for the long-term.

Continuous coverage is provided for a universe of 1,150 publicly traded stocks. Our analysts are organized by industry which gives them keen insights to developments that affect company profits and stock performance. Recommendations and target prices are six-month time horizons.

Zacks "Profit from the Pros" e-mail newsletter provides highlights of the latest analysis from Zacks Equity Research. Subscribe to this free newsletter today: http://at.zacks.com/?id=5517

About Zacks

Zacks.com is a property of Zacks Investment Research, Inc., which was formed in 1978 by Leonard Zacks. As a PhD in mathematics Len knew he could find patterns in stock market data that would lead to superior investment results. Amongst his many accomplishments was the formation of his proprietary stock picking system; the Zacks Rank, which continues to outperform the market by nearly a 3 to 1 margin. The best way to unlock the profitable stock recommendations and market insights of Zacks Investment Research is through our free daily email newsletter; Profit from the Pros. In short, it's your steady flow of Profitable ideas GUARANTEED to be worth your time! Register for your free subscription to Profit from the Pros at http://at.zacks.com/?id=5518.

Visit http://www.zacks.com/performance for information about the performance numbers displayed in this press release.

Follow us on Twitter: http://twitter.com/zacksresearch

Join us on Facebook: http://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts

Disclaimer: Past performance does not guarantee future results. Investors should always research companies and securities before making any investments. Nothing herein should be construed as an offer or solicitation to buy or sell any security.

Contact:
Mark Vickery
Web Content Editor
312-265-9380
Visit: www.zacks.com

As a result, the company is a top-performing Zacks #1 Rank today that has also enjoyed upward earnings estimate revisions in just the past week.

On what's shaping up to be another solid day for the market, volume for Broadpoint Gleacher Securities has reached more than 1.5 million shares, which is well above the daily average of around 764,000.

BPSG is an independent investment bank that provides corporations and institutional investors with strategic, research-based investment opportunities, capital raising and financial advisory services. It also offers mergers and acquisitions advisory services, as well as restructuring and recapitalization advisory services.

It is part of the financial-investment brokers industry. The only other company from this space on today's Zacks #1 Rank List is The Goldman Sachs Group, Inc. (GS).

Earnings Estimates

Analysts' earnings estimates for Broadpoint Gleacher Securities have been moving in an upward direction for months now, including some sharp gains in the past 7 days.

Currently, the Zacks Consensus Estimate rests at 30 cents per share. With 2 of 4 covering analysts revising higher, that estimate has gained 11.1% in the past week. It is also 20% better than the level from 1 month ago.

The Zacks Consensus Estimate for next year is at 41 cents per share, or approximately 37% atop the consensus for this year. In addition, the guidance has improved nearly 8% in 7 days and almost 14% in 30 days. Much like the expectation for this year, two of 4 analysts have raised their estimates in the past week.

BPSG was featured as a Momentum Buy Stock of the Day on Sep 18.

Second Quarter

The rising stock market is most likely a big reason for the improved earnings estimates. But equally as important was a strong second-quarter report from late July.

Broadpoint Gleacher Securities closed the acquisition of Gleacher Partners Inc. on Jun 5, and announced earnings per share of 18 cents the following month. In addition to being above the year-ago result, it also beat the Zacks Consensus Estimate by 200%.

Meanwhile, net revenues advanced to $92.7 million from $34.1 million, due mainly to fixed income and investment banking.

Growth came from areas relatively new to the company, such as restructuring, liability management, the rates group and structured mortgage products.

"I could not be happier with the integration of our two firms so far," said Chairman Eric Gleacher. "We have already begun the process of offering our respective clients a broader array of advisory and corporate finance services."

Zacks Investment Research

The debt offering was managed by Bank of America Securities LLC, the investment banking arm of Bank of America Corp. (BAC), Citigroup Global Markets Inc., the brokerage and securities arm of Citigroup Inc. (C) and Deutsche Bank Securities Inc., the U.S. investment banking and securities arm of the German banking colossus Deutsche Bank AG (DB).

The senior unsecured notes were priced at 99.931% of the principal amount to yield 5.884% to maturity. Boston Properties plan to utilize the proceeds to reduce its huge debt. At the end of the second quarter, the company had about $6 billion in debt maturing by 2015.

Boston Properties develops, redevelops, acquires, manages, operates, and owns a diverse portfolio of Class A office, industrial, and hotel properties in the U.S. The majority of the company’s income comes from office properties, which are primarily concentrated in large, high-barrier urban markets that usually fare better in a faltering economy.

Company Description

Goldman Sachs Group is a financial services firm offering investment banking, securities and investment management services to corporations, governments and high-net-worth individuals.

Zacks Consensus Estimates Spiking

There hasn't been much news out of Goldman Sachs since I last reviewed the company in July. But analysts continue to be extremely bullish on the company and estimates are jumping.

The third quarter Zacks Consensus Estimate rose 8 cents in just the last 7 days to $3.49 per share. That is up from $2.57 per share 90 days ago.

The outlook for the full year has also drastically changed in the last 3 months as the full year Zacks Consensus Estimate jumped nearly 30% to $16.17 from $12.45. It is up 20 cents in just the prior 7 days as 2 out of 19 analysts raised.

The company is scheduled to report third-quarter results on Oct 14.

Will the Third Quarter Be Another Record?

On July 14, Goldman Sachs reported record revenue for the second quarter which was a result of outstanding gains in the Trading and Principal Investments business segment which jumped 93% from the year ago period.

Several of its other segments saw recovery but not to 2008 levels. Investment banking was still 15% under the year ago quarter and the mergers and acquisition segment saw revenues decline 54% year over year.

Value Fundamentals

Goldman Sachs is a Zacks #1 Rank (strong buy) stock. It has a price-to-book ratio of just 1.59. Its 5-year average return on equity (ROE) is a stellar 22.55%.

Check out the 1-year chart below:

Zacks Investment Research

Bloomberg had reportedly been approached to acquire BusinessWeek earlier, even before the start of the official auction process began in July. However, the company did not consider the proposal on grounds of higher valuation.

Bloomberg’s renewed interest in the struggling magazine is part of its business strategy to sustain expansion beyond its core business. The company has a news service, publishes books and magazines, and circulates business information through TV, radio, and the Internet.

Earlier in July, parent group McGraw-Hill Co.s (MHP) said that it was seeking strategic options for BusinessWeek, which was severely battered by plunging advertising demand amid the global recession. Advertising pages in BusinessWeek's global edition declined 34.3% in the second quarter of 2009. The company has hired investment bank Evercore Partners to manage the sale.

McGraw-Hill has been able to attract potential bidders for the magazine. These include Bruce Wasserstein, the Chairman and CEO of investment banking firm Lazard Frères, media business manager ZelnickMedia Corp. and private equity firms OpenGate Capital, Platinum Equity and Warburg Pincus.

Company Description

Piper Jaffrey Companies provides investment banking, sales and research services in the financial sector worldwide. The company was founded in 1895 and has a market cap of $917 million.

Shares of PJC have taken flight over the last few months as the financial sector and overall economy have begun to heal. The company's strong second-quarter results, reported on July 22, showed the company moving back into profitability from the previous year.

Second-Quarter Results

Sales were up 12% from last year to $216.2 million. Earnings were also strong, coming in at 59 cents per share, 20 cents better than the Zacks Consensus Estimate.

A couple of the company's largest business segments rebounded nicely after dipping lower last year. Investment banking was up 79% to $63 million, while institutional sales and trading was up 17% to $65.6 million.

Estimates Surge

After the company's solid performance, estimates surged. The current year jumped from -17 cents to $1.00 per share. The next-year estimate is bullish, pegged at $1.73, a 73% growth projection.

Valuation

The optimism has worked its way into Piper's share price, trading at 46X current-year earnings, a steep premium to the overall market.

The Chart

Shares of PJC have more than doubled in the last 4 months, rallying from less than $20 in early March to a recent high above $49. Take a look below.

Zacks Investment Research

The lawsuit resulted from an investigation into possible violations of fair-lending and consumer-fraud laws. By resorting to discriminatory and illegal mortgage lending practices, the company allegedly misled borrowers in the state about loan-mortgage terms, misrepresented the benefits of refinancing, repeatedly refinanced loans and used deceptive mailing and marketing tools to bewilder borrowers. On the other hand, white borrowers with similar incomes received lower-cost loans with more favorable terms from Wells Fargo.

The class-action suit asked the court to rescind all unfair contracts and grant full restitution to affected consumers. It also asked the court to impose civil penalties for violations.

Wells Fargo is the fourth-largest (in terms of assets) financial services company in the U.S. with $1.3 trillion in assets and nearly $800 million in deposits, providing retail and wholesale banking, mortgage banking, consumer finance, equipment leasing, insurance brokerage, agricultural finance, securities brokerage, trust, investment banking, and other financial services.

The company has been able to attract potential bidders for the magazine. One of them is OpenGate Capital, the Los Angeles private equity firm that acquired TV Guide magazine in October last year.

Another bidder could be Bruce Wasserstein, a veteran financier who is Chairman and CEO of investment banking firm Lazard Frères. Wasserstein is also Chairman of investment firm Wasserstein & Co., which has substantial interest in Penton Media (an independent publisher of trade magazines) and owns The Deal magazine. In 2003, Wasserstein had bought New York magazine. There are other companies in the race as well.

Like other print media, BusinessWeek's advertising revenue has been declining year on year. Newspapers and magazines have been hurt most by the economic downturn as readers are switching to online financial news, thereby making the newspaper and magazine advertising model irrelevant and reducing print news readership.

According to the Publishers Information Bureau, BusinessWeek’s advertising pages in the global edition for 2008 plunged 16.1% compared to 2007, whereas for the first quarter of 2009, advertising pages plummeted 39.8%. Advertising sales during the first six months of the year 2009 fell by 33%.

McGraw-Hill Co.s is a diversified publisher and provider of financial information and a provider of media services to customers in over 40 countries. The company is a leading textbook publisher and owns one of the top credit rating agencies (Standard & Poor’s). The company’s other businesses have also come under pressure during the recession.

We maintain a Hold rating on the stock.

Regions Financial Corp. (RF), Comerica Inc. (CMA) and ZION Bancorporation (ZION) reported losses in the quarter primarily due to continued strain in their loan portfolios, as the commercial sector continues to droop in the prolonged recession.

Along with continued losses in their residential mortgage, home equity and consumer loan portfolios, these banks are also showing continued distress in their residential and commercial development loans, as well as commercial real estate loans.

Large-cap center banks and brokerage firms like Goldman Sachs (GS), Bank of America (BAC) and JPMorgan Chase (JPM) were able to somewhat offset weak credit metrics by strong results in their investment banking and mortgage refinancing divisions.

Regional banks, however, are much more directly connected to the state of the economy and the interest rate spreads. Weak demand for lending as a result of a shaky economy can severely affect their profitability as borrowers, thereby increasing nonperforming assets.

The mounting credit concerns suggest that a majority of the regional banks reporting their earnings in the coming week will report losses. Banks reporting this week are Fifth Third Bancorp (FITB), Huntington Bancshares Inc. (HBAN), PNC Financial Services Inc. (PNC), SunTrust Banks, Inc. (STI), KeyCorp (KEY) and US Bancorp (USB).

Though commercial loan losses are seen as the final stage of a downtrend in a credit cycle, it still remains to be seen just how severe it turns out to be.

This compares to a net loss of $488 million, or $1.09 per diluted share, in the prior quarter and $1.13 billion, or $2.71 per diluted share, in the prior-year quarter.

Results were hurt by cash and deemed preferred stock dividends of $164 million, or 28 cents per share (after-tax), paid in connection with TARP funds and additional common equity raised. The downside also resulted from a $313 million sequential increase in loan loss reserve to $2.5 billion (pre-tax), representing 3.53% of total loans and 114% of non-performing loans.

Tax-equivalent net interest income decreased 3.6% sequentially to $598 million. This decrease was a result of a 10 bps decrease in NIM to 2.67%.

Non-interest income for the quarter increased 30.7% year-over-year to $715 million. The increase was primarily attributable to repositioning of the securities portfolio, net gains on leased equipment which more than offset a $63 million reduction in income from investment banking and capital markets. Non-interest expense for the quarter increased 12.0% year-over-year to $870 million.

Provision for loan losses from continuing operations was $850 million, compared to $647 million in the prior-year quarter. It exceeded net loan charge-offs by $311 million as the company continued to add to its reserves.

Credit quality metrics worsened significantly during the quarter. Non-performing assets as a percentage of portfolio loans, other real estate owned assets, as well as other nonperforming assets increased 88 bps sequentially and 199 bps year-over-year to 3.58%. Net charge-offs, as a percentage of average loans from continuing operations, increased 34 bps sequentially and 24 bps year-over-year to 2.99%.

Capital ratios continued to exceed all regulatory benchmarks as the company raised additional equity during the quarter. KEY's tangible equity to tangible assets ratio was 10.16% at the end of Jun 30, 2009, compared to 9.23% at the end of the prior quarter and 6.98% in the prior-year quarter. Tier 1 risk-based capital ratio was 12.42%, compared to 11.22% in the prior quarter and 8.53% in the prior-year quarter.

Though the company has taken steps to reduce its exposure to the Commercial Real Estate (CRE) home builders segment, we anticipate further reserve building as a result of higher losses in the CRE portfolio in the coming quarters.

Further, we expect elevated provision requirements combined with high overhead costs and weak net interest to put significant pressure on the company's profitability in the intermediate term.

As such, we maintain our Sell rating on the shares of KEY.

Net revenues for the quarter were $5.4 billion, compared with $6.1 billion in the second-quarter 2008. The consensus estimate called for a loss of 49 cents per share.

The results were in contrast to very strong results from competitors like Goldman Sachs (GS) and JP Morgan (JPM), which have adopted a more aggressive approach and have been gabbing market share after the financial crisis.

The results were negatively affected by a $2.3 billion, or $1.32 per diluted share, accounting charge related to the tightening of its credit spreads (improving credit worthiness) and an $850 million or 74 cents per diluted share, negative adjustment related to TARP repayment.

Investment banking delivered strong results with underwriting revenues up 19% year-over-year to $855 million. There were strong gains in both equity and debt underwriting. During the quarter, many companies (mostly financial companies) have tapped equity and debt markets to raise capital, which helped the results of Morgan Stanley and its competitors.

The company also saw improvements in prime brokerage, cash equities as well as in investment grade and distressed debt trading and in wealth management. However, there was weakness in other key areas of fixed income trading and in asset management.

The company recorded $700 million in charges related to losses on its investments in real estate. It's exposure to the Commercial Real Sector, which is deteriorating rapidly, will remain a cause for concern in the coming quarters.

Company Description

Goldman Sachs Group is a financial services firm offering investment banking, securities and investment management services to corporations, governments and high-net-worth individuals.

Goldman Saw Record Quarterly Revenue

On July 14, Goldman Sachs reported second-quarter 2009 results which easily surprised on Wall Street estimates by 40.06%, or $1.41 per share. Earnings per share were $4.93 compared to analysts' estimates of $3.52.

The record revenue was a result of a surge in the Trading and Principal Investments segment which saw revenue 93% higher than the second quarter of 2008 and 51% higher than the first quarter of the year. Revenue in FICC and the Equities segment were also higher than a year ago with Equities climbing 28% over the second quarter of 2008.

Investment banking appears to be on the road to recovery with quarter after quarter revenue rebounding by 75% but it still lagged the second quarter of 2008 by 15%. Financial Advisory segment, which handles mergers and acquisitions, saw revenue fall 54% compared to a year ago as fewer deals are being completed.

As the stock market fell in 2008 and 2009, the Asset Management segment was pressured, falling 28% compared to a year ago.

During the second quarter of 2009, assets under management increased $48 billion due mainly to market appreciation as the stock and fixed income markets rebounded. However, there was also new money coming in, with $6 billion of the $48 billion coming from net inflows.

The number of employees fell 1% during the quarter as the company put aside $6.65 billion in compensation and benefits expenses which included salaries and estimated year-end discretionary bonuses as well as severance costs and payroll taxes.

Consensus Estimates Move Sharply Higher

Given the much-better-than expected second quarter earnings report, covering analysts scrambled to raise estimates on the third quarter and the full year.

Third quarter consensus estimates leaped 11.72% in the last week with 12 out of 18 covering analysts raising to an average of $3.24 from $2.90 per share.

Full year consensus estimates surged 17.37% to $15.47 from $13.18 in the last 7 days with 14 out of 19 covering analysts raising.

Analysts now expect year over year earnings growth of 246.01%, which reflects the turnaround in the fortunes of the financial sector since 2008.

Value Fundamentals

Goldman Sachs is a Zacks #1 Rank (strong buy) stock. It has a price-to-book of 1.54. The company has a stellar 5-year average return on equity (ROE) of 22.58%.

Zacks Investment Research

Company Description

Jefferies Group, Inc., with its subsidiaries, operates as a securities and investment banking company domestically and internationally. The company was founded in 1962 and has market cap of $3.35 billion.

Jefferies share price took a big hit during the financial crisis in the fall of 2008, but has since rebounded very nicely as the company prepares to report much better than expected second-quarter results.

Second-Quarter Results Pre released

On June 24, Jefferies pre-released its second-quarter results, coming in much better than expected. Revenue should be a record $500 million, while income is expected to top $50 million, a sharp increase from a quarterly loss in the same period last year.

Earnings Details

The company said that the strong results were driven by trading in fixed income and commodities, sales and trading in corporate bonds, asset-backed securities and emerging markets debt. To top it off, Jefferies investment banking revenue is set to exceed $90 million, a 146% increase from last year.

Estimates Sky-Rocket

Estimates have been trending higher over the last 3 months, climbing from a loss of 12 cents to the current projection of 84 cents. The next-year estimate is pegged at $1.10, a 31% earnings growth projection.

The Chart

Shares of JEF have been rallying since early March, climbing from just below $8 to a recent high above $22. More recently, shares have bumped into some short-term resistance near the 6-month high, take a look below.

Zacks Investment Research

Company Description

Goldman Sachs in an investment bank that specializes in providing investment services like investment banking and money management. The company was founded in 1869 and has a market cap of $74 billion.

First-Quarter Results

Goldman's share price has been in rally mode for most of the last 7 months after bottoming out last November during the height of the financial crisis. The company's much better than expected first quarter results, reported on May 15, have given shares an extra boost.

Revenue was down from last year, coming in at $11.88 billion. Income however was actually up from last year, improving to $3.39 per share, far ahead of the consensus of $1.64.

Spreads Drive Trading Results

Goldman's results were helped by excellent results from its credit trading division, which benefited from unusually large spreads due to the market volatility.

Estimates Surge

With renewed optimism running through the economy and the financial sector, analyst have become very bullish on Goldman. The next-year estimate is surging, jumping to $11.51 per share from just $7.72 60 days ago. The next-year estimate is pegged at $13.11, a 14% earnings growth projection.

Valuations

In spite of the big run-up in the company's share price, it still looks reasonably valued due to higher estimates. Based upon the current-year estimate, this stock has a P/E multiple of just over 12X, in line with the overall market.

The Chart

As previously mentioned, shares of GS have been locked into a nice rally for the last 7 months, having received a nice boost in the last 3 months from a stronger overall market. Take a look at the nice run below.

Zacks Investment Research

That said, we believe that banks in stable emerging economies, such as Chile, Brazil or India, may be more attractive investments, similar to what we expect for certain regional banks in the US. To be sure, banks in emerging economies will face asset quality issues; however, they are not confronted with other significant problems that many of the larger banks in Europe and the United Kingdom are, such as toxic securities, dilution from capital raising, and dividend cuts/omissions. Moreover, these emerging market banks generally tend to be well capitalized, aren't as heavily exposed to the property markets, and have significant and generally growing sources of noninterest income.

In fact, Zacks-covered banks in Latin America and Asia have outperformed the S&P 500 year-to-date, increasing 19.2% and 10.0%, respectively, versus a 0.7% gain in the S&P 500, and compare to a 2.0% decline for Zacks-covered banks in Europe and the United Kingdom.

There are several caveats one should consider when investing in these banks. First, investment in non-US ADR bank stocks entails foreign currency risk. Currently, the US$ is appreciating against many foreign currencies, which tends to depress US$ share performance. On the other hand, when this turns and the US$ starts falling against other foreign currencies, this will accelerate gains in US$. More importantly, we expect stock prices will continue to be volatile, reflecting economic uncertainty and headline risk in the coming months.

OPPORTUNITIES

Specific banks that could outperform include Itau Unibanco Banco Multiplo S.A. (ITU) in Brazil, Banco Santander Santiago (SAN) in Chile, and HDFC Bank Limited (HDB) in India.

ITU is the largest bank in Brazil, following the February 2009 merger of Uniao de Bancos Brasileiros S.A. and Banco Itau Holding Financeira S.A. (or Itau), with R$575 billion (US$240 billion) in assets, 4,800 branches, and a 19% share of the Brazilian loan market.

SAN is the largest private bank in Chile (total assets of Ch$21,137 billion or US$33.6 billion at yearend 2008) and is 77% owned by Banco Santander Central Hispano, the largest bank in Spain and one of the largest in Europe.

HDB is now one of the largest banks in India, with Rs183,271 crores, or US $35.1 billion, and a retail network of 1,412 branches and 3,295 ATMs in 528 cities for the fiscal year ending March 31, 2009.

WEAKNESSES

We would avoid the larger banks in the Great Britain and Ireland, particularly those that that have participated in government recapitalization programs, such as The Royal Bank of Scotland Bank plc (RBS) and Lloyds Banking Group plc (LYG) in Britain and Allied Irish Banks (AIB) and The Governor and Company of the Bank of Ireland (IRE).

In return for the government capital and asset quality protection, these banks must submit to other government intervention, including limits on dividend payouts and nomination of board members. This will limit their financial flexibility for awhile and raises issues of complete nationalization, which could continue to hurt share price performance.

Current Sells include Banco Bilbao Vizcaya Argentaria, S.A. (BBV) and Banco Santander Central Hispano, S.A. (STD), both headquartered in Spain. In Spain, the recent collapse in housing and construction, which propelled economic growth for the last decade, is expected to stall for the next few years. Moreover, the International Monetary Fund (IMF) believes that Spain will be harder-hit by the global economic downturn than other European countries. Indeed, Spain's unemployment rate was 17.4% at the end of March, more than double the level a year ago. Zacks Investment Research

That said, we believe that banks in stable emerging economies, such as Chile, Brazil or India, may be more attractive investments, similar to what we expect for certain regional banks in the US. To be sure, banks in emerging economies will face asset quality issues; however, they are not confronted with other significant problems that many of the larger banks in Europe and the United Kingdom are, such as toxic securities, dilution from capital raising, and dividend cuts/omissions. Moreover, these emerging market banks generally tend to be well capitalized, aren't as heavily exposed to the property markets, and have significant and generally growing sources of noninterest income.

In fact, Zacks-covered banks in Latin America and Asia have outperformed the S&P 500 year-to-date, increasing 19.2% and 10.0%, respectively, versus a 0.7% gain in the S&P 500, and compare to a 2.0% decline for Zacks-covered banks in Europe and the United Kingdom.

There are several caveats one should consider when investing in these banks. First, investment in non-US ADR bank stocks entails foreign currency risk. Currently, the US$ is appreciating against many foreign currencies, which tends to depress US$ share performance. On the other hand, when this turns and the US$ starts falling against other foreign currencies, this will accelerate gains in US$. More importantly, we expect stock prices will continue to be volatile, reflecting economic uncertainty and headline risk in the coming months.

OPPORTUNITIES

Specific banks that could outperform include Itau Unibanco Banco Multiplo S.A. (ITU) in Brazil, Banco Santander Santiago (SAN) in Chile, and HDFC Bank Limited (HDB) in India.

ITU is the largest bank in Brazil, following the February 2009 merger of Uniao de Bancos Brasileiros S.A. and Banco Itau Holding Financeira S.A. (or Itau), with R$575 billion (US$240 billion) in assets, 4,800 branches, and a 19% share of the Brazilian loan market.

SAN is the largest private bank in Chile (total assets of Ch$21,137 billion or US$33.6 billion at yearend 2008) and is 77% owned by Banco Santander Central Hispano, the largest bank in Spain and one of the largest in Europe.

HDB is now one of the largest banks in India, with Rs183,271 crores, or US $35.1 billion, and a retail network of 1,412 branches and 3,295 ATMs in 528 cities for the fiscal year ending March 31, 2009.

WEAKNESSES

We would avoid the larger banks in the Great Britain and Ireland, particularly those that that have participated in government recapitalization programs, such as The Royal Bank of Scotland Bank plc (RBS) and Lloyds Banking Group plc (LYG) in Britain and Allied Irish Banks (AIB) and The Governor and Company of the Bank of Ireland (IRE).

In return for the government capital and asset quality protection, these banks must submit to other government intervention, including limits on dividend payouts and nomination of board members. This will limit their financial flexibility for awhile and raises issues of complete nationalization, which could continue to hurt share price performance.

Current Sells include Banco Bilbao Vizcaya Argentaria, S.A. (BBV) and Banco Santander Central Hispano, S.A. (STD), both headquartered in Spain. In Spain, the recent collapse in housing and construction, which propelled economic growth for the last decade, is expected to stall for the next few years. Moreover, the International Monetary Fund (IMF) believes that Spain will be harder-hit by the global economic downturn than other European countries. Indeed, Spain's unemployment rate was 17.4% at the end of March, more than double the level a year ago. Zacks Investment Research

UBS (UBS) shares opened higher on Tuesday after the troubled Swiss bank said it would lay off about 8% of employees at its wealth management group in Asia Pacific to cut costs.

Zurich-based UBS already has plans to slash about 11,000 investment banking jobs to bring its total staff down to about 75,000 this year. The latest cut of 240 jobs represents about 3% of the bank's total Asia-Pacific workforce. These include 100 redundancies in Singapore.

After his appointment last February, Chief Executive Oswald Gruebel had indicated that he would not shy away from laying off employees to lower costs. UBS has amassed more than $50 billion in write-downs and taken aid from the Swiss government to combat the global economic downturn. As the recession deepens, the banking giant might shed jobs in other parts of the world soon.

Shares of UBS were up more than 4% to $11.34 in morning trade on the New York Stock Exchange.

This from Money Morning:

The gathering of 20 largest industrial countries in Washington this past weekend – billed as a crucial G20 summit – turned out to be a rather dull scrum.

There were promises of a coordinated approach to bank regulation, additional economic stimulus packages, and increased allocations for the International Monetary Fund (IMF) –one of the five “aftershock-investing” opportunities Money Morning has counseled readers to watch for. But none of the G20 meeting proposals seemed even remotely…

More from The Sovereign Society:

In 1955, U.S. manufacturing was approximately 55% of the nation’s GDP. Today, manufacturing is barely 15% of GDP as the United States and other industrialized countries continue to transition to service-based economies. Unfortunately, the backbone of American industry is now coming apart at the seams and desperately hungry for a government bailout.

In 2004, I predicted that…

MSNBC reported last night that Obama is already getting advice from Ben Bernanke.  That ought to make you feel warm and fuzzy right there.

But wait, there’s more!  As of this writing it appears Lawrence Summers is the leading candidate for Treasury Secretary.  As in, the guy who was Clinton’s last Treasury Secretary.  So much for the promise of “no retreads” in an Obama administration.

I mean, Larry Summers?!  That’s really in-your-face, on any number…

1 Page Guide to the CFA Designation

Related to CFA Designation:

• Chartered Hedge Fund Associate (CHA)
• CFA vs. CAIA
• Hedge Fund Tracker Tool
• CFA Study Materials
• Financial Certification
• Chartered Financial Analyst CFA
• Chartered Financial Analyst (CFA) Study Tips
• CFA Institute | Exams, Books, Resources & Standards
• CFA Pass Rate
• How to Study for the CFA Exam
• CFA Study Guide
• CFA Level 1 Exam Details
• CFA Courses
• Chartered Alternative Investment Analyst (CAIA)

In less than one month, Americans will vote into office either Barack Obama or John McCain. Each has very different ideas about how to tackle the financial crisis.

Martin Hutchinson says Obama is most likely to win on a populist anti-Wall Street platform. But if he follows up this rhetoric with more regulation and protectionism, this could hurt US investors even more in the long run.

This from Money Morning:

The market’s verdict on the billion bailout was pretty clear: Stock prices started dropping the moment the bill was passed on Friday afternoon and continued to do so Monday, with the Dow Jones Industrial Average closing down 370 points for the day – after being down 800 points earlier that same day.

The economic effect is also pretty clear: Given that the bailout plan is being launched at a point when money is already tight – and that it pours $700 billion of our money into the most useless, toxic waste left over from the housing bubble – you can be certain that it will end up starving more-worthwhile potential investments of badly needed capital.

But the political impact is less clear, in both the short- and long-term periods.

For a start, it’s not clear to the electorate who is to blame for the financial debacle. The Democrat presidential nominee, U.S. Sen. Barack Obama, D-Ill., naturally blames the Bush administration and mysterious “deregulation” for the problem. Indeed, he has a particular deregulatory act in mind, the 1999 Gramm-Leach-Bliley Act, which ended the separation of commercial and investment banking – conveniently ex-Sen. Phil Gramm was an advisor to Republican presidential nominee, Sen. John McCain, R-Ariz.

Add in conventional Democratic rhetoric about the “evils” of Wall Street (albeit toned down somewhat since so many Wall Street titans are Democratic supporters and have provided funding for Obama’s campaign) and you would think he had a pretty clear path to sail to achieve electoral victory. After all, if economic or political disaster occurs on the “other guy’s watch, it generally doesn’t take a rocket scientist to figure out a way to blame that “other guy” for what happened.

However, it’s not quite as simple as that, though you would think it was from the initial reactions of the McCain campaign. Blaming Wall Street greed gets Republicans nowhere, since Wall Streeters are popularly thought to be mostly Republican. And if there was regulating to be done, why didn’t the Republican administration do it? Thus, the populist comments by the Republican vice-presidential candidate, Alaska Gov. Sarah Palin, at the end of the vice-presidential debate last Thursday night amounted to a series of “own goals”— a soccer term for when a team forgets which end is which and boots the ball past its own goalkeeper.

There are two perfectly respectable things a Republican candidate can say in defense of the last eight years of economic management:

• First, much of the housing disaster was caused by the activities of Fannie Mae (NYSE:FNM) and Freddie Mac (NYSE:FRE), the two government-backed behemoths who should never have existed in a rational free-market economic system – and who were pushed into conservatorship by foreign governments
• Second, much of the misbehavior on Wall Street – as well as the subsequent collapse – resulted from an excessively loose monetary policy by the U.S. Federal Reserve over a period of more than a decade – and the Fed, in case nobody noticed, is not a private-sector operation.

There were signs Monday that McCain was moving onto the attack on the subject of Fannie Mae and Freddie Mac. Obama, after all, was the Senate’s second-largest recipient of campaign funds provided by the executives of those organizations – topped only by Sen. Christopher J. Dodd, D-Conn., who chairs the Senate Banking, Housing, and Urban Affairs Committee, which oversees Fannie and Freddie. Further, McCain was a leader of the (rather feeble) Republican attempts in 2005 to rein them in, which Obama and other Democrats opposed. Indeed, back in 2004-2005, there are lots of good sound-bite quotes from the Democrats about what splendid organizations Fannie and Freddie were.

Regrettably, for the Republicans, the responsibility of Fannie and Freddie for the disasters on Wall Street, while substantial (the securitization market would probably not have got off the ground without them) is somewhat indirect. Even more directly linked is the responsibility of the Fed in inflating money supply and inflating bubble after bubble. No politician, except the eccentric Rep. Ron Paul, R-Tex., has gone after the Fed, and since neither McCain nor Palin can be classed as economic experts, it seems very unlikely that either of them will use the Fed’s misdeeds as a key election-talking point in the last month of the campaign.

Thus, Obama’s mantra of Wall Street greed and excessive deregulation will probably continue to register with voters in the next few weeks, and should maintain – or even increase – the lead Obama is showing in opinion polls. The $700 billion bailout, which appears (rightly) to be massively unpopular, will remain in the news as supervising staffers are appointed and the first purchases of loans are made, and will be blamed primarily on the administration that thought of it. Both candidates supported it, so any advantage between them will be minor. At this point, therefore, it is difficult to see how McCain can win on Nov. 4, unless some foreign policy crisis refocuses the electorate’s attention away from the economy.

Obama elected on a platform similar to President Bill Clinton’s 1992 platform of free trade and middle class tax cuts would be relatively investor-friendly, as was Clinton himself. Moreover, Obama’s undoubted ability might help him take the right steps to clear up the current mess and move the economy back into growth mode. But Obama elected on a platform of bashing Wall Street, opposing global trade, raising taxes on the rich and re-regulating everything is a very different matter; if he really believed his own propaganda he would be a menace both to investors and the U.S. economy.

Fortunately, as with most politicians, it seems likely that what Obama says to get elected and what he will do in office bear little relation to each other. We will just have to wait and hope.

Source: Election 2008: Who Will Get to Spend the $700 Billion?

Cerberus Capital Management LP | Notes

Resource #1: Canadian Imperial Bank of Commerce, which has taken more writedowns than any Canadian lender during the financial crisis, said Cerberus Capital Management LP will invest $1.05 billion in its U.S. real estate portfolio, helping the bank reduce risk. The U.S. buyout fund will pay cash for senior notes linked to the residential real estate assets, the Toronto-based bank said today in a statement. Cerberus will receive cash flow from the notes, while CIBC will retain ownership of the underlying assets, the bank said.
CIBC, which wrote down its debt investments by about C$7.55 billion ($6.97 billion) since last year, said it's giving away ``potential upside'' in its portfolio to protect against any downside in the real estate market.

``We've been very clear that we've been looking to de-risk the bank, and I think this a pretty high profile example of finding a way to do that,'' Chief Administrative Officer Ron Lalonde said in a telephone interview.

Chief Executive Officer Gerald McCaughey has been trying to reduce risk at the bank's U.S. operations, selling most of its New York-based investment banking business to Oppenheimer Holdings Inc. in January. More......

Don't Miss Important Hedge Fund Resources, Subscribe to the Daily Hedge Fund Newsletter

Related to Cerberus Capital Management LP:

• Top 52 Most Popular Articles
• Hedge Fund Tracker Tool
• Financial Certification
• Hedge Fund Forum
• Hedge Fund Accountants
• Investment Consultants
• Investment Book
• Hedge Fund Terms and Definitions
• Geographical Hedge Fund Guides
• Hedge Fund Database

We are reducing our EPADS estimates to $3.80 from $4.00 for 2008 and to $4.20 from $4.50 for 2009, mainly due to recent appreciation of the $ against the £. We expect results to continue to reflect global markets' turmoil and also the recent $1.75 billion acquisition of Lehman Brothers North American investment banking and capital markets operations, funded with £701 million of new equity capital.

Currently, Barclays is trading at 7.7X the consensus earnings estimate for 2008 and 7.4X the 2009 consensus estimate. This is below the industry median P/E ratios of 8.8X for 2008, but on par with the 7.4X for 2009, also based upon consensus estimates.

Barclays estimated future growth matches the industry median, and its attractive 10.3% dividend yield should provide support for the stock price. Our price target of $24 represents approximately a 5 ¾X P/E multiple of 2009 estimated earnings of $4.20 per ADS, providing a PEG ratio of 0.6X, roughly in line with the industry.

Read the full analyst report on BCS