A Tale of Two Charge Cards: Europe Boosts MasterCard, U.S. Slows Visa

Two credit-card companies, two different responses to their earnings. While disappointed investors have sold off shares of Visa (V), MasterCard (MA) is relatively unchanged.

Bloomberg

MasterCard reported a profit of $7.27 a share, beating forecasts for a profit of $6.94, while Visa said it earned $1.85 a share, in line with analyst forecasts.

The big difference between the two: Europe. MasterCard has it, Visa not really. Bloomberg explains:

Europe accounted for 28 percent of MasterCard purchases in the three months through June 30, company data show. Visa generates about 2 percent of its revenue on the Continent as domestic transactions are handled by Visa Europe Ltd., a separate firm owned by banks that pays royalties to its U.S.-based namesake.

Raymond James analysts Wayne Johnson and Brandon Pickett tell investors not to worry about Visa:

We are reiterating our Strong Buy investment rating on shares of V after a solid F4Q13 highlighted by healthy transaction volumes in all geographies and significant share repurchase activity. However, a stronger U.S. dollar is negatively impacting top-line growth and domestic payment volume is beginning to modestly slow due to a mix of lower gas prices and stagnant economic growth. That said, rest of world trends remain healthy and the company remains committed to returning capital to shareholders, as evidenced by the announcement of a large new buyback program yesterday and a significant quarterly dividend raise last week. We continue to think Visa is one of the most attractive growth investments in our space and expect the company to push through any near-term headwinds.

Sterne Agee’s Greg Smith and Jennifer Dugan are not so sure:

Visa noted some slowing in spending and more FX pressure and consequently lowered its revenue guidance for FY14 while maintaining its EPS guidance. Visa continues to manage expectations and execute well, but we still do not see a favorable risk/reward here in light of competitive threats and potential regulatory-related pressures.

Jefferies’ Jason Kupferberg and team call MasterCard’s earnings “a nice Halloween treat.” They write:

MA’s overall 3Q print was impressive, highlighted by better than expected volume and processed transaction growth, including acceleration in Europe and an upside surprise in US credit, both of which we think are important positives. Net revs beat JEFe/Street by 1.7%/4.0% on lower rebates, and even excluding the benefit from lower tax, EPS beat JEFe/Street by 1.0%/2.5%.

Shares of MasterCard have dropped 0.1% to $724.75 at 2:03 p.m. Visa, meanwhile, has fallen 2.8% to $198.16. American Express (AXP) has dropped 1.3% to $82.02 and Discover Financial Services (DFS) is off 0.7% at $52.12.

Is General Motors the Great American Bailout Success Story?

With shares of General Motors Company (NYSE:GM) trading at around $32.85, is GM an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let's analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

C = Catalyst for the Stock's Movement

General Motors is a feel-good story. Americans love comebacks, and General Motors definitely fits the bill. Another feel-good aspect of this story is that based on employee reviews at Glassdoor.com, General Motors is a company that truly tries to do the right thing for its customers. And according to employees, it never cuts corners. In all, employees see the company they work for as the good guys. And an impressive 77 percent of employees approve of CEO Daniel F. Akerson.

It's widely believed that corporate America is evil. However, in this case, the good guys are winning. Below is a quick look at April sales improvements:

Chevrolet: Increased 11 percent

Cadillac: Increased 34 percent

Buick: Increased 11 percent

GMC: Increased 7 percent

General Motors is also consistently launching new vehicles, which is an indication of confidence in future prospects. The company is performing well in emerging markets, such as Brazil, China, and India. Overall, Q1 global vehicle sales increased 3.6 percent. And General Motors increased its market share by 0.02 percent in Q1 to 11.4 percent.

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General Motors isn't just focused on growth; it's also focused on cost reduction in Europe, which should help the bottom line. General Motors has strong exposure to Europe. For example, 17.6 percent of its 2012 revenue came from Europe.

It should also be noted that General Motors is on Goldman Sachs's Hedge Fund VIP List. The companies on this list have outperformed the market year-to-date as well as last year. It's a follow-the-smart-money approach for investors. However, this doesn't guarantee future results. Furthermore, analysts love the stock: 16 Buy, 3 Hold, 1 Sell.

Now let's get to some numbers. Below is a chart comparing basic fundamentals for General Motors, Ford Motor Co. (NYSE:F), and Toyota Motor Company (NYSE:TM).

	GM	F	TM
Trailing P/E	11.25	10.05	16.15
Forward P/E	7.54	8.93	12.08
Profit Margin	4.00%	4.27%	4.36%
ROE	15.20%	33.97%	9.09%
Operating Cash Flow	8.92B	7.18B	31.15B
Dividend Yield	N/A	2.70%	1.10%
Short Position	7.50%	2.00%	N/A

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Let's take a look at some more important numbers prior to forming an opinion on this stock.

T = Technicals Are Strong

General Motors has been trading right along with the industry over the past year, which is a good thing – a very good thing! However, General Motors doesn’t offer any yield whereas Ford yields 2.70 percent and Toyota yields 1.10 percent.

	1 Month	Year-To-Date	1 Year	3 Year
GM	12.27%	13.91%	52.74%	N/A
F	14.27%	16.09%	49.06%	36.01%
TM	11.10%	33.72%	62.85%	70.01%

At $32.84, General Motors is trading above its averages.

50-Day SMA	30.48
200-Day SMA	28.15

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E = Equity to Debt Ratio Is Strong

The debt-to-equity ratio for General Motors is stronger than the industry average of 0.80.

	Debt-To-Equity	Cash	Long-Term Debt
GM	0.48	24.31B	18.42B
F	5.99	24.18B	107.60B
TM	1.11	30.73B	179.57B

E = Earnings Have Been Inconsistent

Annual earnings have been inconsistent, but they have been on the right side of the line. Annual revenue has consistently improved, but the rate of growth has slowed.

Fiscal Year	2008	2009	2010	2011	2012
Revenue ($) in millions	0	0	135,592	150,276	152,256
Diluted EPS ($)	NA	NA	2.89	4.58	2.92

When we look at the last quarter on a year-over-year basis, we see declines in revenue and earnings.

Quarter	Mar. 31, 2012	Jun. 30, 2012	Sep. 30, 2012	Dec. 31, 2012	Mar. 31, 2013
Revenue ($) in millions	37,759	37,600	37,600	39,300	36,884
Diluted EPS ($)	0.60	0.90	0.89	0.54	0.58

Now let's take a look at the next page for the Trends and Conclusion. Is this stock an OUTPERFORM, a WAIT AND SEE, or a STAY AWAY?

T = Trends Support the Industry (for now)        

Due to the Chinese/Japanese conflict over islands in the East China Sea, General Motors and Ford have gained market share in China. Chinese consumers are shying away from Toyota and Honda.

In a more overall sense, do you believe Europe is bottoming? Do you believe the American consumer is strengthening? Do you believe China is slowing? The answers to these three questions will give you your answer as to whether or not the auto industry will perform well over the next three to five years.

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Conclusion

General Motors has potential to run higher, but since it looks more likely that Bernanke will unwind later this year, auto manufactures could become high risk. It would be wise to see how the broader market acts over the next few trading days prior to considering any positions in General Motors.

3-D printing stocks: Fad or for real?

NEW YORK (CNNMoney) Shares of companies in the 3-D printing business have been on a tear this year. And the 3-D stocks continued to rally Tuesday despite a conservative outlook from industry leader 3D Systems .

3D Systems (DDD) reported record sales for the third quarter on "unprecedented" demand for its printers, which includes the consumer-friendly $1,300 Cube.

Earnings were in-line with expectations, but the company lowered its guidance for full-year profits. Still, the stock bounced back from losses in the early morning and was up more than 1% in midday trading. Shares of competitors Stratasys, ExOne and voxeljet moved higher as well.

3D Systems CEO Avi Reichental said earnings may suffer in the short term as the company ramps up manufacturing capacity and spends more money to develop new products. He said in a statement that the company is prioritizing "market share expansion ahead of earnings per share."

That strategy may make sense. While 3-D printing has existed on an industrial scale for decades, it has only recently become accessible for small businesses and consumers. And the business has become highly competitive.

Investors have piled into 3-D printing stocks this year as the technology has been used to produce everything from action figures to medical devices. But the outlook from 3D Systems does highlight concerns about the young industry's growing pains.

  Printing a 3D robot

There are now four publicly-traded companies that make 3-D printers and accessories, including two that went public earlier this year.

Germany's voxeljet (VJET)was the latest to hit the market. The company pr! ovides on-demand 3-D printing for industrial and commercial customers, among other services. Less than two weeks after its IPO, voxeljet shares have surged 140%.

ExOne (XONE), which makes industrial 3-D printers, has nearly doubled since its initial public offering in February.

Shares of Stratasys (SSYS) have surged 30% this year, due in part to its acquisition of MakerBot in August. MakerBot was one of the first companies to sell desktop 3-D printers.

So consumers and investors have plenty of pure play 3-D printing company to choose from ... and other tech companies are gearing up to join the fray as well.

Hewlett-Packard (HPQ, Fortune 500) CEO Meg Whitman announced earlier this month that the company will enter the 3-D printing market sometime next year.

What the JPM Settlement Means for Wall Street

The $13 billion settlement between JPMorgan Chase & Co. (NYSE: JPM) and the federal government shocked markets this week, as the fines would be a record paid by a Wall Street institution.

According to reports, the sum will amount to approximately half of the company's 2012 profits.

The JPM settlement is another black eye for the company and its weathered Chief Executive Officer (CEO) Jamie Dimon, who had emerged from the financial crisis as a pseudo cult figure with Teflon status.

The deal is the largest in a string of 8-, 9-, and 10-figure settlements between the bank and its regulators. Once the house that Morgan built, its status has withered as a result of these deals.

It's expected that both Dimon and the bank will survive once again, but two questions have again emerged from this news.

First, who will be next to feel the hammer of regulators; second, are these banks still too big to fail?

Post-JPM Settlement: Who Will Be Next?

JPMorgan will pay about $4 billion of that settlement to the Federal Housing Finance Agency (FHFA) on loans the bank sold to Fannie Mae and Freddie Mac, the two housing giants that collapsed into government hands in fall of 2008.

The FHFA has taken legal actions against 18 institutions over bad mortgage bonds in 2011, including Citigroup Inc. (NYSE: C), Bank of America Corp. (NYSE: BAC), and UBS. However, only Citigroup, General Electric Co. (NYSE: GE), and UBS have settled.

The FHFA is attempting to recover part of the losses that taxpayers absorbed when Fannie and Freddie were nationalized and received $187.5 billion in federal aid. In addition to the JPMorgan settlement, only the UBS deal has been disclosed at a total of $885 million for bad loans it passed from 2004 to 2007.

According to Bloomberg, the FHFA has now targeted Bank of America.

It is seeking $6 billion in civil claims. Since Bank of America acquired Countrywide Financial in 2008, regulators have placed the company under increased scrutiny due to the mortgage business.

This follows speculation last week when Bank of America analysts grilled the company's CEO Brian Moynihan during its third-quarter conference call over the company's ability to cover the costs of litigation.

During the call, Moynihan told CLSA analyst Mike Mayo that the bank has $14.1 billion in reserves, which includes $8.5 billion from a pending settlement on bad mortgages sold by Countrywide. That settlement might change and could threaten the $5.5 billion left for the company to hand its current legal troubles.

With another big bank in the FHFA's sights, does this mean the winds of [regulation] change have finally swept over Wall Street?

The JPM Settlement: What It Is, What It Isn't

Americans remain angry over the inability of the justice system to hold anyone accountable on Wall Street for the financial crisis.

Where more than 1,000 people from the Occupy Wall Street movement were jailed in street protests and other crimes, no executives from Wall Street have been held accountable for the crisis.

But now, the Justice Department is seeking litigation with "any individual or any institution" that was in any part responsible for the financial crisis. That hunt has gone to international levels as well.

According to Handelsblatt, Deutsche Bank has spoken with 50 employees to determine whether members of the company were engaged in rigging the Libor interest rate.

Meanwhile, in Italy, a UBS banker was arrested and accused of aiding American investors in hiding money in Switzerland.

Still, none of these investigations or charges are criminally linked to the wide-scale financial crisis experienced in 2008.

The Justice Department has signaled a reluctance to prosecute Wall Street for any loan schemes, interest-rate swap deals, and reckless purge of the U.S. Treasury. In March, Attorney General Eric Holder hinted that some banks were so large and vital to the health of the global economy that they were not capable of trying and convicting these actors. This complemented investigations that certain banks had been tied to international money laundering for drug syndicates.

The settlement with JPMorgan, however, will not stop the Justice Department from seeking criminal charges against the company's executives - but it's very clear that, from a criminal standpoint, the case against JPMorgan is weak.

Instead, the government is seeking to punish the company financially.

Unfortunately, that punishment will only impact the holdings of shareholders.

The settlements aren't doing anything to address the failures of Dodd-Frank to end Too Big to Fail, or the wasteful regulatory efforts like Sarbanes Oxley.

Moving forward, Washington may shake down Wall Street, but it's unclear when they're going to get serious about shutting the revolving doors, ending policies that favor the banks, and stopping Too Big to Fail once and for all.

For more on the power wielded by these "Too Big to Fail" banks, read Shah Gilani's The Greatest Criminal Enterprise in the World

Time To Fly High With Spirit Airlines

Florida based Spirit Airlines (SAVE) is an ultra-low cost carrier operating in the U.S., Latin America, and the Caribbean. Presently, the company operates approximately 200 daily flights covering 50 destinations. One unique feature that distinguishes Spirit from its competitors is its ticket pricing strategy. Unlike its competitors, which incorporate a charge for different services in the overall ticket price, Spirit separates the price allowing customers to avail different services as per their need. This pricing strategy attracts price sensitive consumers and increases its market penetration.

In this article, I have explained different factors that will influence Spirit's future performance and drive its stock price.

1) Fuel pricing
For aircraft operators, fuel cost forms a major part of the cost of operations. Therefore, it becomes necessary for the airline companies to forecast the fuel cost in order to adopt a proper pricing mechanism. The most important factors affecting jet fuel prices are the overall outlook for crude price, the refinery cost incurred to convert crude into jet fuel, and the strategy used by companies to hedge against the volatility of jet fuel prices.

The crude prices will soften in 2014 and 2015 and will trade in the range of $95 per barrel to $100 per barrel, compared to current trade at approximately $104 per barrel. This decline in the crude prices will decrease the acquisition cost of crude for the refineries, which in turn will reduce the selling price of jet fuel. Analysts expect refiners' acquisition cost to decrease by an average of 7.3% annually through 2015. Spirit has hedged its estimated consumption of 170 million gallons of fuel in the current year and will gain $9 million from its hedging strategy from the movement of crude oil prices.

IMF Crude Price Outlook (in $ per barrel)

2) Capacity ex! pansion
Recently, the company ordered 20 new A321 aircraft which will be delivered between 2015 and 2017. Additionally, it modified its previous order of 10 A320 aircraft, scheduled for delivery in 2017 and 2018, changing it to A321. The A321 aircraft has 219 seats as compared to 178 seats in the A320. Spirit will increase its fleet strength by 20% in 2013, 13% in 2014, and 16% in 2015.

I can see the tailwinds from the air traffic in the U.S. that will increase gradually due to the improving economy. It will reach approximately 800 million passengers by 2016, up from 700 million passengers in 2012.

For the next few years, Spirit will focus on expanding its reach in Dallas-Fort Worth, Texas, which is currently its second largest destination in terms of passenger traffic. Last year, Spirit focused on its growth in the Western U.S. This expansion trend started in 2011, when the company began to explore new destinations in the U.S. outside its legacy Florida route network. The expansion in the Dallas-Fort Worth route will account for nearly 22% of Spirit's expansion in the current year. Further, Spirit recently made an announcement regarding the start of service between Dallas and Mexico. The passenger traffic in Mexico increased 6% in June this year on a year-over-year basis and will continue the momentum for the remainder of 2013. This is a step forward to capture the increasing traffic in these areas by offering lower fares.

3) A change in accounting

Unlike its competitors which are heavily funded by debt, Spirit has no debt on its balance sheet. This gives the company better financial leverage than its peers.

Presently, the majority of Spirit's lease arrangements are operating leases. Under this arrangement, the company doesn't show aircraft taken on lease as assets on its balance sheet, but it accounts for the lease rentals in its income and expenditure account. In 2012, Spirit paid aircraft rentals of $144 million, which will increase to $175 million and $206 million ! in 2013 a! nd 2014 respectively. Under such circumstance, there is a possibility that the Spirit can change its accounting for further aircraft leased. If it starts accounting under the finance lease method, it will lead to an increase of tangible fixed assets on its balance sheet, and the company will no longer charge lease rentals on its income and expenditure account.

By the current year end, Spirit will have 54 aircraft which will increase to 61 in 2014. Correspondingly the lease rentals are also expected to increase to $175 million in the current year and $206 million in 2014 from $144 million in 2012. If the additional seven aircraft scheduled for delivery in 2014 is accounted under finance lease method rather than operating lease, there can be a reduction of $31 million in its lease rentals. This will reduce the company's operating expenses and result in an increase of nearly 1.6% in its operating margin.

4) Opportunity from ancillary revenue growth

Spirit offers an unbundled ticket component to its passengers, which allows them to pay for the services they require. The extra service charges are ancillary to the base airfare and include charges for services like checked baggage, advance seat selection, and itinerary changes. These ancillary services accounted for 41% of the company's total revenue in 2012, which totaled $536 million.

Going forward, Spirit plans to continue to innovate new ancillary revenue opportunity and enhance existing offerings such as a call center, which will increase the number of travel packages sold directly to the passengers. This initiative will improve the company's revenue from ancillary services, which will contribute significantly to the company's ancillary services revenue generation of $680 million in the current year.

Valuation

Generally, an airline company is valued on the basis of its enterprise value to earnings before interest, taxes, depreciation, amortization and rental expenses, or EBITDAR, multiple, because the lease rentals form! a signif! icant portion of the cost of operations for airlines. However, since Spirit's EPS is expected to grow at a higher rate (a CAGR of 25% through 2015), it is appropriate to apply an equal weight mix of the company's enterprise value and its earnings to arrive at the valuation.

To arrive at Spirit's intrinsic value, I have used the following figures:

Expected revenue of $1.68 billion for 2013

Average expected Gross Margin of approximately 17%

Depreciation of $40 million

Tax of $90 million

To arrive at EBITDAR, the lease rental of $175 million is added back to the gross profit. This gives EBITDAR of $462 million and with an enterprise value of $2.58 billion by the end of 2013 gives us an enterprise value to EBITDAR multiple of 5.58 times. With 72.53 million shares outstanding at the year's end, Spirit's EBITDAR per share comes to $6.37. Further, the company is expected to generate EPS of $2.10 in the current year and trade at a price to earnings multiple of 20 times.

So, applying a 5.58 multiple to EBITDAR per share and a price to earnings multiple of 20 times to the current year EPS, the company's stock should trade at $38.77.

= (6.37*5.58) *0.50 + (2.10*20) *0.50

= $38.77.

Assumptions:

1) I expect the company will not make any fresh issue of equity shares in the current year and the shares outstanding will remain at 72.53 million.

2) An equal weighted average is used to calculate the share price. This is because the company's earning is expected to rise proportionately with its enterprise value in the current year.

Stock price movement

SAVE data by YCharts

Since March 2013, the company's stock price has seen a consistent rise due to its future growth potential. The trend will to continue for the remainder of 2013. One thing the investors should keep in mind is that the company does no! t have an! y long term debt and preference shares outstanding, which implies that all the earnings of the company are attributable to its equity shareholders. Also, due to a debt free balance sheet, the company will be able to raise fresh equity, without any restrictions, at a cheaper rate.

Note:

These factors account for an even higher multiple for valuing the company (which if taken into consideration can further increase the company's stock price).

On July 2, 2013, an aircraft of Spirit airlines avoided a collision with a skydiving plane in the skies over Michigan. The matter is under investigation with the Federal Aviation Administration, or the FAA. If Spirit is at fault, the incident could hurt passenger sentiment, which could affect immediate demand. Therefore, the company's stock price has some potential for volatility when the assessment by the FAA is complete. Though the company's stock may exhibit some volatility, investors shouldn't panic and should continue to hold their position in the stock, as this will just be short term volatility.

Conclusion

Spirit has a strong fundamental base that will drive its future growth potential. The expected decline in the crude oil prices will benefit Spirit, as its operating margins will improve. Further, the recent order placed by the company with the Airbus, its expansion in the Dallas Fort-Worth route, and the start of different routes highlights the company's future expansion plans and it is optimistic about its operations. These expansions coupled with the increasing opportunity from ancillary services will increase the company's overall revenue. Its debt free balance sheet gives it the best leverage position among its peers, which will also support the easy raising of funds for the company. Also, the huge cash balance gives the company flexibility to change its method of accounting for airplanes leased.

Taking into account the above-mentioned factors, and increasing consumer spending in the U.S., I assume the company's stock ! will see ! a further upwards trend in 2013 (though it may experience some volatility) and will trade in the range of $35- $40 for the remainder of 2013. Therefore, I recommend "buying" this stock with a target price of $39.

Source: Time To Fly High With Spirit Airlines

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Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

Restoration Hardware Announces Follow-On Offering

Corte Madera, Calif.-based Restoration Hardware Holdings (NYSE: RH  ) insiders announced a plan to capitalize on its strong share price Friday.

Eight million shares of Restoration Hardware stock will soon go on the market at an offering price of $70 per share. Underwriters may also exercise an overallotment option to sell an additional 1.2 million shares, potentially raising the total value of the offering to as much as $644 million in cash.

Although described in a company press release as a "follow-on" offering, the details of the company's announcement makes clear that this is actually a "secondary" offering of shares -- a sale by existing large stakeholders, cashing out their stock at a profit. As such, Restoration Hardware notes that "the Company will not receive any proceeds from the sale of shares."

Markets reacted poorly to the proposal, as Restoration Hardware shares dropped 3.8% in Friday trading to close at $68.60, 2% below the secondary offering price.

Icahn ups stake in Apple, demands $150 billion buyback

Carl Icahn has written a letter to Apple CEO Tim Cook, asking the company to buy back $150 billion of its own stock.

NEW YORK (CNNMoney) Activist investor Carl Icahn is at it again, this time writing an open letter to Apple CEO Tim Cook and urging the company to buy back $150 billion of its own stock.

His idea: Apple (AAPL, Fortune 500) shares are extremely undervalued, so now's the time for the company to invest in itself -- and increase the value of its investors' stock holdings.

Icahn claims he upped his stake in Apple by 22% over the past month to 4.7 million shares. That's only about 0.5% of the company, but at a value of nearly $2.5 billion, it's a big enough stake to draw attention.

Icahn began his crusade in late September over dinner with Cook. In his letter, posted on Icahn's website, The Shareholder's Square Table, he tries to convince Cook that the company should tap into its massive, $147 billion cash reserves to take advantage of what he portrays as a tiny window of opportunity.

"Irrational undervaluation as dramatic as this is often a short term anomaly," Icahn wrote. "The timing for a larger buyback is still ripe, but the opportunity will not last forever."

Related story: Icahn demands $150 billion from Apple

  Thank the government for your iPhone

To build his case that Apple's shares are undervalued by Wall Street, Icahn notes that the company's shares aren't keeping up with the market as a whole. While the S&P 500 trades at about 14 times the value of estimated future company earnings, Apple trades at just 9 times analysts' estimates, Icahn said.

"With such an enormous valuation gap and such a massive amount of cash on the balance sheet, we find it difficult to imagine why the board would not move more aggressively to buy back stock," he wrote..

To prove he believes the move would benefit investors in the long run, Icahn said he would hold back his shares from any buyback program. In his view, the value of Apple shares could more than double to $1,250 within three years.

Apple didn't respond to requests for comment. Although Apple shares rose slightly on Thursday, they seemed little affected by the news.

S&P Downgrades Nokia

Standard & Poor's cited the impact on Nokia's (NYSE: NOK  ) cash position from the pending $2.23 billion purchase of the remaining 50% ownership stake in Nokia Siemens Networks (NSN) from Siemens as one reason for lowering Nokia's long-term credit rating from BB- to B+, S&P announced today. Nokia's short-term corporate credit rating remained unchanged at B.

According to S&P, Nokia's negative free operating cash flow (FOCF), coupled with the approximately $2.23 billion purchase of NSN, raises concerns about "Nokia's ability to sustainably generate positive FOCF -- especially in its Devices & Services (D&S) division, given the low visibility on revenues and margins and its small market share in smartphones."

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S&P revised its estimates for Nokia's 2013 year-end net cash position to $1.66 billion or above, down from earlier estimates of $3.84 billion. The ratings agency also expects Nokia's "cash burn" in its second quarter to range from $384 million to approximately $1 billion, adding to S&P's concerns surrounding Nokia's long-term FOCF and net cash position.

"The ratings reflect our revised assessment of Nokia's financial risk profile assessment to 'aggressive' from 'significant,' " the agency said. "We continue to assess its business risk profile as 'weak.' "

Nokia FO Timo Ihamuotila said, "With a strong positive gross and net cash position, Nokia was able to take advantage of an opportunity to fully own Nokia Siemens Networks and, we believe, create meaningful value for Nokia shareholders. We will continue to prudently manage our cash resources post-transaction."

-- Material from The Associated Press was used in this report.

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Netflix Really Can Predict What You'll Like

Netflix (NASDAQ: NFLX  ) is on a roll. The streaming service just approved a new season of its original series Hemlock Grove. The show didn't grab the critical acclaim that House of Cards did, but it still attracted enough viewers to warrant signing up for another round.

In the following video, Fool contributor Demitrios Kalogeropoulos discusses how Netflix's analysis of viewer data has helped it make smart gambles like this on exclusive content. The biggest payoff for the company, he says, is that net subscriber additions should continue trending up as the service succeeds in differentiating itself from the competition. 

The television landscape is changing quickly, with new entrants such as Netflix and Amazon.com disrupting traditional networks. The Motley Fool's new free report "Who Will Own the Future of Television?" details the risks and opportunities in TV. Click here to read the full report!

Maria Bartiromo talks to Alcoa’s Klaus Kleinfeld

Now that the government has reopened and President Obama has nominated Fed Vice Chair Janet Yellen to succeed Ben Bernanke, the betting on Wall Street is that the so-called "tapering," or the winding down of the Fed's stimulus program, won't happen until mid-2014. That stimulus has been a key catalyst for the stock rally this year, as low rates have pushed investors to seek higher yields. The Fed says the decision to taper depends on the economic data to come. But some economists expect a weak fourth quarter because of the shutdown. I caught up with an industrial leader to get the deal on exactly where the economy is. Klaus Kleinfeld is the CEO of aluminum maker Alcoa, a metal used in everything from cars to your home and beyond. Our interview follows, edited for clarity and length.

Q: What are you seeing right now in terms of the global economy?

A: We have seen an air of confidence return to the world economy. But the lack of action in Washington acts like a Taser, basically freezing all economic activity. The administration must find immediate solutions to solve this. What is happening in every boardroom around the country is people saying, "Well, lets not invest. Let's wait a couple of weeks until this thing has sorted out, and I can see a clearer picture."

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Q: Are you worried about what America is looking like to the rest of the world with these uncertainties?

A: I'm more worried about what the consequences would be of a default and what the consequences are of a continued conversation. Every day that goes by continues to take confidence away. Activity is frozen because everybody's worried what the next day would bring.

Q: What would be the consequences of a default?

A: A strong reduction of economic growth at a time when the economy has just begun to recover. In the U.S., we've been going into a phase that could bring us 3% grow! th again.. We absolutely need that, because we need jobs to come back.

Q: What about your business? You reported strong earnings. Where are you seeing the vibrancy right now?

A: Aerospace continues to be very strong — there's an eight-year order backlog in this industry. It's very, very, good that we are in there so dominantly. Automotive, particularly here in the U.S., is coming back. All the car companies are doing really well. The most interesting thing for us is that we are going through a historic change here. As fuel efficiency becomes more important, and companies are going for light weight, aluminum is the material of choice. That's another great market for us, a once-in-a-lifetime opportunity.

Finally, building and construction, which we are No. 1 in here in the U.S., that market is coming back. On top of that, the requirements are changing. People don't want to waste energy. They want to have a more energy-efficient building. We have products that cater to this market need.

Q: For a long time, we talked about fuel efficiency. But it wasn't really gaining traction. You're saying now it is?

A: On the automotive side, it depends on which segment you're looking at. Fuel efficiency for planes has always been an issue. Otherwise, it will not lift off the ground. That's one of the big contributions that aluminum brought to this world 125 years ago. Without aluminum, we would not have flight, and certainly, we would not have seen the world from outer space. Now, it's coming to automotive.

Q: What about the rest of the world? How would you characterize Europe and the emerging markets? These were the two areas of weakness for many companies in the last year or two.

A: As Henry Kissinger has said so wisely, there is not one telephone number for Europe. Therefore, you see very different pictures in Europe. Germany continues to do very well. They just came out with the lowest unemployment numbers for a long time. Spain just did a refina! ncing of a! long-term bond, and demand for those long term bonds has been strong in spite of the crisis. Even with a government crisis in Italy, Italian bonds don't show any signs of instability there.

Europe is finding a way out of the crisis. It's slow, but it's slowly recovering. Asia continues to be strong; China is pulling it. There are a lot of other tigers that are coming along with it.

Q: You are celebrating a big anniversary for Alcoa this year.

A: Yes, our 125th anniversary. It's a very cool story. It all started with two young kids in their early '20s more than 125 years ago. Young Charles Martin Hall was the sweet age of roughly 20. Asked his professor at Oberlin College, "What do I have to do to become the richest man on this planet?" The professor didn't have to think much. He said, "If ever anybody found a way how to make this miracle metal called aluminum in an industrial weight, I am sure that person will become the richest man on this planet." That gave him the shot in the arm. He had a great help, which is another great story with Julia, his older sister, who was also studying at Oberlin College. They both cracked the code. And here we are 125 years later. They brought industrial aluminum making to us.

Bartiromo is anchor of CNBC's Closing Bell and anchor and managing editor of the nationally syndicated On The Money with Maria Bartiromo. Follow her on Twitter @mariabartiromo. To see previous columns, go to bartiromo.usatoday.com.

It's Time for Apple To Give Us a New Toy

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Alamy This would seem to be a good time to be Apple (AAPL). The consumer tech giant sold a record 9 million new iPhones during the iconic smartphone's debut weekend last month. On Tuesday, Apple has another media event -- its traditional way of unveiling its latest updates. "We still have a lot to cover," reads the invitation. Don't Hold Your Breath Despite the tantalizing nature of Apple promising that it has a lot to cover, fans shouldn't hold out for Apple smart watches, smart televisions, or computerized glasses. Analysts aren't expecting for much more than the fifth generation of the iPad, plus some refreshed Macbooks and Macs, and and an updated desktop operating system. Apple doesn't march to the beat of conventional wisdom. Simply following rival Samsung into smart watches and TVs or Google (GOOG) into smart specs isn't its style. Apple isn't a follower. The iPod raised the bar for digital media players. The iPhone wasn't the first smartphone, but it changed the game, transforming them from email-centric devices with physical keyboards into its now widely duplicated design and touchscreen interface. Nobody thought they needed a tablet until the iPad suddenly made it an essential. The iPad hit the market in 2001. The iPhone followed in 2007. The iPad started converting skeptics in 2010. Based on that calendar, it would seem as if Apple is due to create a new category or disrupt an old one. But it doesn't look like that'll happen soon. The Competition's Heating Up Growth has been a challenge at Apple in recent quarters. Macs, iPads, and iPods saw sales slide 1 percent, 31 percent, and 27 percent, respectively, in Apple's fiscal third quarter. We'll get a more current snapshot of the Mac Daddy's state when it reports quarterly results later this month. Analysts expect to see a sharp drop in profitability with a mere 2 percent uptick in sales, and that's essentially how the former tech darling's financial check ups have been going lately. Sales growth has been sluggish, and profitability has been slipping as Apple makes less money off every product it sells in this competitive marketplace. Right now, the iPhone is carrying Apple. Sales of the consumer tech giant's iconic smartphone rose 15 percent in the fiscal third quarter. However, with sources telling The Wall Street Journal that Apple is cutting orders of its entry-level iPhone 5c -- the iPhone 5s is still selling well -- it may not be long before Apple needs a new workhorse. Great Expectations Wearable computing is all the rage these days, yet Apple has surprisingly stayed out of this potentially lucrative market. It's not just about Google Glass, those costly yet vaguely creepy high-tech spectacles. Smart watches fall into the realm of wearable computing, and it seems as if everybody outside of Apple is racing into this market, intent on putting out wristwatches that also interact with smartphones via Bluetooth to provide incoming texts and emails, as well as running a few apps. An upstart named Pebble kicked things off last year with one of the more successful Kickstarter campaigns on record. Best Buy (BBY) began stocking Pebble smart watches earlier this year. This summer we saw the only company selling more smartphones than Apple -- Samsung -- introduce its smart watch. Another area where investors expected Apple to have made a bigger splash by now is the smart television market. Yes, Apple TV has been around for years, but we're not talking about those Web-tethered set-top boxes. We're talking about a full-blown smart television. One of the last things that Steve Jobs told his biographer was that Apple had finally "cracked" the problem with smart televisions. Well, maybe it did, but whatever cracked hasn't hatched. Apple really could make a major dent in this market if it's able to pair up to the Internet-connected TV with a mold-breaking streaming cable service. Google and even Intel (INTC) have gotten into the market of offering pay TV services. Apple -- with its deep video connections through iTunes -- could breathe new life into a surprisingly moribund TV market. Still, we are unlikely to see any of these new toys that have been staple rumor mill chatter for years when it stages its media event on Tuesday. However, Apple can't take its current product portfolio for granted. Apple's last breakthrough was the iPad in 2010. Jobs died a year later, and the market's been questioning if Apple can innovate in a material way without him. Apple needs to show us something new, and that can't happen soon enough.

Fi360 Acquires Flagship Fiduciary Tool IPSAdvisorPro

Fiduciary die-hards will tell you that at the heart of the financial planning process—which has many steps—is the critical step and client deliverable of the investment policy statement.

The IPS, as it’s referred to by advisors, records how client monies will be managed, along with guidelines and constraints affecting investment decisions and responsibilities.

CFPs Norman Boone and Linda Lubitz literally wrote the book (“Creating an Investment Policy Statement,” FPA Press 2004) on the topic, and their IPSAdvisorPro has been the flagship software product in the financial planning field.

Now, that product may soon reach a much larger array of financial advisors with its acquisition by fi360, a leading fiduciary tools and training organization, which certifies fiduciary advisors through its AIF and AIFA designations.

Fi360 announced its purchase of IPSAdvisorPro on Thursday, without disclosing terms of the sale, and ThinkAdvisor reached out to Norm Boone to find out what the sale of his flagship product and life’s work means for the industry.

“We’ve been thinking and writing about this this for a long time,” says Boone, head of San Francisco-based Mosaic Financial Partners — "we" being him and his wife and business partner, Linda Lubitz Boone, head of Miami-based Lubitz Financial Group.

Boone wrote an article on the topic for the Journal of Financial Planning in 1992 and developed a product for Ibbotson in 1996 — “It was on an 8¼-inch floppy disk,” he says — before he and Lubitz published their 2004 book and then launched IPSAdvisorPro in 2006.

“I’ve been doing this for 26 years, and Linda for a little over 20,” Boone says. “And in our work with our clients, transparency became an increasingly important issue for us.

“We really believe that having a document that reports all of the agreements that we’ve made with the client about how we’ll invest the money helps their level of trust with us and eliminates the possibility of unhappy clients because they’ll get exactly what was expected.”

Those benefits of the IPS clearly resonated with fiduciary advisors. Today, IPSAdvisorPro has some 700 to 800 users — investment advisory firms whose advisor head count totals close to 2,000 or 3000, Boone says. He adds that the number of individual or institutional clients using the IPS through the software is now close to 50,000.

But there is plenty of room for expansion, Boone says.

“Our greatest competition is 1) people not writing investment policy statements and 2) advisors using basically a word document, creating a template and filling in the blanks later on.”

Boone says that latter approach has lots of drawbacks, including the likelihood of office mates (there are 19 staffers at his firm) not updating or messing up the template and the huge time and trouble it takes to input broad policy changes across all investment policy statements within the firm.

“If you buy new portfolio rebalancing [software] and you’ve got 150 clients, you need to go into each account and change each one of them,” he says.

Apart from the time savings, consistency and efficiency, the IPSAdvisorPro keeps advisors’ compliance officers happy.

“It relieves them of concern that [advisors] are making unwanted changes to the document.”

Boone says compliance officers will have even more reason to be happy with fi360’s acquisition, since the fiduciary firm has its own IPS tool, and Boone and Lubitz, who will serve fi360 as consultants, intend to combine the best features of both products.

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“They have testing back end that allows the compliance officer to say, “You said you’d do X, now how has your performance been?’”

But perhaps the biggest benefit of the merger is fi360’s prominent position in the fiduciary marketplace.

“They have a greater presence than Linda and I had,” he says. Besides the untapped U.S. advisor marketplace, Boone says there is demand from the fiduciary communities in Canada, Australia, Japan, the U.K. and New Zealand, which fi360 is better positioned to meet.

The fiduciary training firm has been on an acquisitions roll, having acquired Ann Schleck & Co. and Financial Services Standards earlier this year.

“Most advisors haven’t known what should go into an IPS. [IPSAdvisorPro] has given them a starting point,” Boone says, adding that he is excited about where fi360 will now take it.

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Check out Dalbar: Advisors Should Sell Goals, Not Funds on ThinkAdvisor.

Downgrades: 6 things you need to know

The United States lost its AAA rating in 2011 and is at risk of getting dinged again.

NEW YORK (CNNMoney) The threat of a potential default is pushing the United States toward yet another downgrade by a major credit rating agency.

Yes, we've seen this movie before.

In 2011, the last time Washington waited until the last minute to raise the debt ceiling, Standard & Poor's removed the United States' sterling AAA credit rating. This time around it's Fitch that has put the country on notice.

Stock investors did not react well to the last downgrade. When markets opened, all three major U.S. stock indexes lost between 5% and 7% -- the worst single day since the 2008 financial crisis.

Another downgrade in the days to come would surely grab headlines, but what are the implications?

Here's a primer on the rating agencies and their relationship to the chaotic events on Capitol Hill.

What do rating agencies do? The big three rating agencies -- Fitch, Standard & Poor's and Moody's -- rate debt based on the likelihood that it will be repaid. They rate everything from obscure derivatives to government bonds, with the safest bets labeled AAA. Some firms use their ratings as guidelines when making investment decisions.

What are the U.S. ratings? U.S. debt had been rated AAA by all three agencies for as long anyone can remember. Moody's, for example, first assigned the United States a AAA rating in 1917.

Right now, Fitch and Moody's have a AAA rating on U.S. debt. The country's S&P rating is AA+ -- still strong, but not the highest. It's on par with that of France, but below countries like the United Kingdom and Australia.

Why is another downgrade possible? Fitch said Tuesday that it had put the United States on review for a possible downgrade, saying the "political brinkmanship" on display in Washington increases the risk of the U.S. defaulting on its debts.

The country is now on "rating watch negative," meaning that there is increased possibility of a downgrade in the near future.

Fitch took this action even while saying it expects a deal will be struck to raise the debt ceiling and avoid default.

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But if they're wrong, look out. All three agencies would surely issue new downgrades if a debt payment is missed.

What do they mean by "default?" In this case, what technically constitutes default is a little murky.

The rating agencies look specifically at debt issued by the Treasury Department -- they don't care about other government obligations, like Social Security and Medicare payments.

Related story: 6 ways a default could hurt the world

Moody's has said that even if lawmakers fail to raise the debt ceiling by Thursday's deadline, the United States would likely be able to preserve its credit rating -- not to mention the stability of world financial markets -- by prioritizing interest payments on its debt over other obligations.

But others, including the Treasury Department itself, say this solution is unworkable.

What happens if we get downgraded again? Probably not too much. Back in 2011, some analysts feared the S&P downgrade could cause U.S. borrowing costs to soar. That didn't happen.

True, world markets lurched in the days following the downgrade, but rather than making borrowing more difficult, Treasury yields actually fell. More than two years later, the move appears to have had little lasting effect.

Why should anyone care what the rating agencies say? Analysts say the rating agencies no longer have they influence they once did on investors. Their critics say they lost credibility for their role in the housing crash, having stoking the bubble by blessing securities that contained bad-risk mortgages.

The rating agencies also face a particularly tough task when trying to quantify political risk -- a factor that is paramount when gauging the probability of a U.S. default.

The fiscal and political situation in Washington is well known, and the agencies are not basing their rating on any information that is not already available.

! This sug! gests that investors may be better served by conducting their own analysis, and not relying on the credit rating agencies for insight.

Central Banks Gaming Out U.S. Default as Deadline Nears

Central banks have begun making contingency plans on how they would keep financial markets working if the U.S. defaults on the world's benchmark debt.

Policy makers discussed possible responses when they met at the International Monetary Fund's annual meetings in Washington over the weekend, said officials who spoke on condition of anonymity because the talks were confidential. The discussions continued as policy makers headed home.

"Because in the past it's always been sorted out is absolutely not a reason to fail to do the contingency planning," Jon Cunliffe, who joins the Bank of England as deputy governor for financial stability next month, told U.K. lawmakers yesterday. "I would expect the Bank of England to be planning for it. I'd expect private-sector actors to be doing that, and in other countries as well."

The initial response from the world's central banks would likely echo their actions after the collapse of Lehman Brothers Holdings Inc. in 2008. Back then, policy makers pledged they would provide ample liquidity, eased the collateral they lent against and boosted dollar swap lines with each other to ensure supply of the currency.

The $12 trillion of outstanding U.S. government debt is 23 times the $517 billion Lehman owed when it filed for bankruptcy on Sept. 15, 2008.

Time Short

"The bank has at its fingertips a range of tools to ensure the system operates properly, that liquidity conditions remain normal in all sorts of eventualities," Bank of Canada Governor Stephen Poloz told reporters in Washington on Oct. 11. He declined to talk about specifics.

Central bankers would have had a chance to discuss the threat of default when U.S. Federal Reserve Chairman Ben S. Bernanke hosted a lunch of counterparts on Oct. 12 during the IMF meetings.

Time is running short for U.S. lawmakers as they try to end a stalemate that risks pushing the nation into default if the government's borrowing authority isn't raised before Oct. 17. Senate Democratic and Republican leaders were working yesterday on the details of an accord that would prevent the nation from breaching the debt ceiling and end a partial government shutdown now entering its 15th day.

"We've made tremendous progress," Senate Majority Leader Harry Reid, a Nevada Democrat, said yesterday as the chamber adjourned, adding that he hoped a deal could be announced as soon as today. His Republican counterpart, Senator Mitch McConnell of Kentucky, said there was "substantial progress."

'Main Benchmark'

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While policy makers from Japan to Saudi Arabia have expressed faith in the ability of the U.S. to pay its bills, a default would put the world in uncharted territory.

Central bankers have spent the past six years expanding their toolkit for dealing with a financial crisis that began in August 2007 when tremors in the U.S. subprime mortgage market began reverberating worldwide. That turmoil deepened with the Lehman failure and was then extended by Europe's fiscal woes.

"You want the plumbing of the financial sector to keep working even with the main benchmark in default," said Rob Wood, an economist at Berenberg Bank in London and a former official at the Bank of England. "You want to avoid a firesale of U.S. assets."

The Fed opened what eventually became 14 swap lines in December 2007 to provide the global financial system with dollar liquidity as the subprime mortgage crisis stirred doubts about the quality of assets on bank balance sheets around the world. They were boosted as markets froze the following year.

Lines Extended

The swaps were closed in February 2010 and re-opened three months later amid a squeeze in dollar funding due to the euro area debt crisis. Last December, the Fed extended the lines with the Bank of Canada, Bank of England, the European Central Bank and the Swiss National Bank (SNBN) until February 2014. The swaps allow the central banks to borrow in dollars from the Fed and then auction them at home.

With less room to cut interest rates now than in 2008, when major central banks did so in unison, a U.S. default would prompt officials to first focus on pumping cash into the financial system, said Stewart Robertson, an economist at Aviva Investors Ltd in London, which has about $438 billion under management.

"There are other measures they can take, such as easing liquidity strains," Robertson said. "They might actually find that easier than after Lehman. At that time there was really a worry about who was holding billions and trillions of toxic waste. With this, you know more what's happening."

Hold Back

While they could utilize swap lines and keep accepting Treasuries as collateral, central banks would probably hold back on easing monetary policy because they would bet the U.S. would quickly end the default once markets turned volatile and recession loomed, said Wood of Berenberg Bank.

"It's only if you think the default will be extended and politicians won't react enough that you would engage in significant monetary policy," he said. "Would you buy oodles more bonds if you expected lawmakers to act?"

To be sure, not even the world's most powerful central banks have the weapons to counter the potential fallout of even a so-called technical default, finance executives say.

"It will be like putting band-aids on a gaping wound," Deutsche Bank AG co-Chief Executive Officer Anshu Jain said at a panel discussion hosted by the Institute of International Finance in Washington on Oct. 12.

'Irrevocable' Aspects

Jain said the bank's analysis of the consequences of even a "technical default" found that "there are aspects to that which are irrevocable."

"Once you miss payment on U.S. Treasury debt, we don't want to go into all of it but I'll give you a little taste," said Jain. "Things like tri-party repo, the underpinning of the collateral system, there are legal ramifications which we believe are probably incurable."

JPMorgan Chase & Co. (JPM) CEO Jamie Dimon said at the same event that his bank has calculated it probably processes about six or seven billion dollars a week in benefits such as Social Security, food stamps and veterans benefits. "We were going to fund it, despite the fact that we weren't being paid by the government, because those people have to eat," Dimon said.

A default, however, would be tougher to prepare for, he said."You don't know the effect and the ripple effect of that through money market funds, people start drawing down revolvers, people don't know if collateral is good," he said. "We can't have a debt default."

For those reasons, global financial policy makers maintain that a default is unlikely.

"It's unthinkable that an agreement won't be found," European Central Bank President Mario Draghi told reporters in Washington. Japanese Finance Minister Taro Aso told Bloomberg Television's Sara Eisen that "there's no other way than for the U.S. government itself and the U.S. Congress to sort it out."

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If you're starting to get dizzy following the market, you're not the only one. For the third day in a row, the Dow Jones Industrial Average (DJINDICES: ^DJI  ) moved by triple digits, this time falling by 0.9% today. On a day with no major earnings reports, Bank of America (NYSE: BAC  ) and Apple (NASDAQ: AAPL  ) , arguably the market's two most volatile megacaps, seemed to be the culprits as both were down 4.7% and 5.5%, respectively.

Indexes in Germany and France were also both down 2.3% on rumors that the eurozone's two biggest economies could see downgrades in their credit ratings. The head of Germany's national bank, Jens Weidmann, said that the debt crisis could take the continent a decade to get over.

This afternoon's release of the Federal Reserve's Beige Book report showed the central bank sees a continuing "moderate" pace of growth from the economy as improvements in the housing and auto sector help defray headwinds from budget cuts and higher taxes. Though the Fed's observations and announcements sometimes cause wild swings in the market, today's report produced no reaction from investors.

Top 10 Bank Companies To Watch In Right Now: EverBank Financial Corp (EVER.N)

EverBank Financial Corp, incorporated in 2004, is an unitary savings and loan holding company. The Company provides a range of financial products and services directly to customers through multiple business channels. Its operating subsidiary is EverBank. As of December 31, 2011, EverBank had $ 10.3 billion deposits. EverBank offers a range of banking, lending and investing products to consumers and businesses. EverBank provides services to customers through Websites, over the phone, through the mail and at 14 Florida-based Financial Centers. The Company operates in two operating business segments: Banking and Wealth Management, and Mortgage Banking. Its Banking and Wealth Management segment includes earnings generated by and activities related to deposit and investment products and services and portfolio lending and leasing activities. Its Mortgage Banking segment consists of activities related to the origination and servicing of residential mortgage loans. In April 201 2, the Company acquired MetLife Bank�� warehouse finance business. In October 2012, it acquired Business Property Lending, Inc.

Asset Origination and Fee Income Businesses

The Company has a range of asset origination and fee income businesses. The Company generates generate fee income from its mortgage banking activities, which consist of originating and servicing one-to-four family residential mortgage loans. It originates prime residential mortgage loans using a centrally controlled underwriting, processing and fulfillment infrastructure through financial intermediaries (including community banks, credit unions, mortgage bankers and brokers), consumer direct channels and financial centers. Its mortgage origination activities include originating, underwriting, closing, warehousing and selling to investors prime conforming and jumbo residential mortgage loans. From its mortgage origination activities, it earns fee-based income on fees charged to b orrowers and other noninterest income from gains on sales ! fr! om mortgage loans and servicing rights. During the year ended December 31, 2011, it originated six billion dollars of residential loans. It generates mortgage servicing business through the retention of servicing from its origination activities, acquisition of bulk mortgage servicing rights (MSR) and related servicing activities.

The Company�� mortgage servicing business includes collecting loan payments, remitting principal and interest payments to investors, managing escrow funds for the payment of mortgage-related expenses, such as taxes and insurance, responding to customer inquiries, counseling delinquent mortgagors, supervising foreclosures and liquidations of foreclosure properties and otherwise administering its mortgage loan servicing portfolio. It earns mortgage servicing fees and other ancillary fee-based income in connection with these activities. It services a portfolio by both product and investor, including agency and private pools of mortgages secured by properties throughout the United States. As of December 31, 2011, its mortgage servicing business, which services mortgage loans for itself and others, managed loan servicing administrative functions for loans with unpaid principal balance (UPB) of $54.8 billion.

The Company originates originate equipment leases nationwide through relationships with approximately 280 equipment vendors with networks of creditworthy borrowers and provide asset-backed loan facilities to other leasing companies. Its equipment leases and loans finance essential-use health care, office product, technology and other equipment. Its commercial financings range from approximately $25,000 to $1.0 million per transaction, with typical lease terms ranging from 36 to 60 months. Its commercial finance activities provide it with access to approximately 25,000 small business customers nationwide, which creates opportunities to cross-sell its deposit, lending and wealth management pro ducts. It focuses to offer warehouse loans, which are s! hort-! te! rm revo! lving facilities, primarily securitized by agency and government collateral. It provides financial advisory, planning, brokerage, trust and other wealth management services to its mass-affluent and high-net-worth customers through its registered broker dealer and recently-formed registered investment advisor subsidiaries.

Interest-Earning Asset Portfolio

As of December 31, 2011, the Company�� interest-earning assets were $11.7 billion. As of December 31, 2011, its loan and lease held for investment portfolio was $6.5 billion. As of December 31, 2011, the carrying values of its interest-earning assets are: residential, government-insured (residential), securities, commercial and commercial real estate, Bank of Florida (covered), lease financing receivables, and other.

Residential includes primarily prime loans originated and retained from its mortgage banking activities, acquired from third parties or held for sale to other investors. government-insured (residential) includes Government National Mortgage Association (GNMA) pool buyouts with government insurance, sourced from its mortgage banking segment and third-party sources. Securities include non-agency residential mortgage-backed securities (MBS) and collateralized mortgage obligation (CMO) purchased at significant discounts. This portfolio includes protection against credit losses from purchase discounts, subordination in the securities structures and borrower equity. Commercial and commercial real estate includes a range of commercial loans, including owner-occupied commercial real estate, commercial investment property and small business commercial loans. As of December 31, 2011, Bank of Florida (Covered) includes commercial, multi-family and commercial real estate loans with $71.3 million of purchase discounts. Lease financing receivables include covered lease financing receivables. As of December 31, 2011, the lease portfolio had $64.7 million of total discounts. Other includes home equity loan! s and lin! ! es of cre! dit, consumer and credit card loans and other investments.

Deposit Generation

As of December 31, 2011, the Company had approximately $10.3 billion in deposits. Its market-based deposit products, consisting of its WorldCurrency, MarketSafe and EverBank Metals Select products, provide investment capabilities for customers seeking portfolio diversification with respect to foreign currencies, commodities and other indices. Its financial portal includes online bill-pay, account aggregation, direct deposit, single sign-on for all customer accounts and other features. Its Website and mobile device applications provide information on its product offerings, financial tools and calculators, newsletters, financial reporting services and other applications for customers to interact with it and manages all of their EverBank accounts on a single integrated platform. Its new mobile applications allow customers using iPhone, iPad, Android and Blackberry devices to view account balances, conduct real time balance transfers between EverBank accounts, administer billpay, review account activity detail and remotely deposit checks.

The Company generates deposit customer relationships through its consumer direct, financial center and financial intermediary distribution channels. Its consumer direct channel includes Internet, e-mail, telephone and mobile device access to product and customer support offerings. Its direct distribution with a network of 14 financial centers in Florida metropolitan areas, include Jacksonville, Naples, Ft. Myers, Miami, Ft. Lauderdale, Tampa Bay and Clearwater. As of December 31, 2011, its financial centers had average deposits of $130.5 million, which is approximately double the industry average. In addition, it generates noninterest-bearing escrow deposits from its mortgage servicing business.

Top 10 Bank Companies To Watch In Right Now: HSBC Holdings PLC (HBC)

HSBC Holdings plc (HSBC), incorporated on January 1, 1959, is a global banking and financial services organizations. As of December 31, 2010, it provided a range of financial services to around 95 million customers through two customer groups, Personal Financial Services (PFS), including consumer finance, and Commercial Banking (CMB), and two global businesses, Global Banking and Markets (GB&M), and Global Private Banking (GPB). Its international network covers 87 countries and territories in six geographical regions; Europe, Hong Kong, Rest of Asia-Pacific, the Middle East, North America and Latin America. As of December 31, 2010, the Company had an international network of some 7,500 offices in 87 countries and territories in six geographical regions; Europe, Hong Kong, Rest of Asia-Pacific, the Middle East, North America and Latin America. PFS incorporates the Company�� consumer finance businesses, which include HSBC Finance Corporation (HSBC Finance). In April 2011, the Company closed its retail banking operation in Russia. In July 2011, the Company sold its unsecured written-off personal loan and credit card portfolio to J M Financial Asset Reconstruction Co. Pvt. Ltd. On May 20, 2012, HSBC Holdings PLC's wholly owned subsidiary HSBC Bank USA, N.A. and other wholly owned subsidiaries, sold 195 retail branches to First Niagara Bank, N.A. (First Niagara). In May 2012, the Company�� 70.03% owned subsidiary, HSBC Bank Malta plc, sold its card acquiring business to HSBC Merchant Services Ltd. In June 2012, the Company�� indirect wholly owned subsidiary, HSBC Iris Investments (Mauritius) Ltd, sold its 4.73% interest in Axis Bank Limited and 4.74% interest in Yes Bank Limited. In July 2012, its subsidiary, HSBC Europe (Netherlands B.V.), sold its 100% interest in HSBC Credit Zrt, to CentralFund Kockazati Tokealap. On March 31, 2013, Enstar Group Ltd�� subsidiary completed the acquisition from Household Insurance Group Holding Company of HSBC Insurance Company of Delaware and Household Life Insur! ance Company of Delaware, as well as its three subsidiary insurers.

The Company�� principal banking operations in Europe are HSBC Bank plc in the United Kingdom, HSBC France, HSBC Bank A.S. in Turkey, HSBC Bank Malta p.l.c., HSBC Private Bank (Suisse) S.A. and HSBC Trinkaus & Burkhardt AG. Through these operations it provides a range of banking, treasury and financial services to personal, commercial and corporate customers across Europe. HSBC�� banking subsidiaries in Hong Kong are The Hongkong and Shanghai Banking Corporation Limited and Hang Seng Bank Limited.

The Company offers a range of banking and financial services in the People�� Republic of China, mainly through its local subsidiary, HSBC Bank (China) Company Limited. It also participates indirectly in the People�� Republic of China through its four associates. Outside Hong Kong and the People�� Republic of China, it conducts business in 22 countries and territories in the Rest of Asia-Pacific region, through branches and subsidiaries of The Hongkong and Shanghai Banking Corporation, with coverage in Australia, India, Indonesia, Malaysia and Singapore.

In the Middle East, the Company has network of branches of HSBC Bank Middle East Limited, together with HSBC�� subsidiaries and associates. Its North American businesses are located in the United States, Canada and Bermuda. Operations in the United States are conducted through HSBC Bank USA, N.A., which is concentrated in New York State, and HSBC Finance, a national consumer finance company based near Chicago. HSBC Markets (USA) Inc. is the intermediate holding company of, inter alia, HSBC Securities (USA) Inc. HSBC Bank Canada and HSBC Bank Bermuda operate in their respective countries.

The Company�� operations in Latin America consists of HSBC Bank Brasil S.A.-Banco Multiplo, HSBC Mexico, S.A., HSBC Bank Argentina S.A. and HSBC Bank (Panama) S.A. In addition to banking services, it operates insurance businesses in Brazil, Mexi! co, Argen! tina, Panama and a range of smaller markets.

Personal Financial Services

PFS offers the Company�� products and services to customers based on their individual needs. Premier and Advance services are for customers who value international connectivity and benefit from its global reach and scale. It offers a range of banking products and services reflecting local requirements. In addition, it issues card globally, offering HSBC branded cards, co-branded cards with selected partners and private label (store) cards. Its customer offerings include personal banking products, including current and savings accounts, mortgages and personal loans, credit cards, debit cards and local and international payment services, and wealth management services, including insurance and investment products and financial planning services.

HSBC Premier provides preferential banking services to high net worth customers and their immediate families with a relationship manager, wealth advice and solutions. Customers can access emergency travel assistance, telephone banking and an online global view of their Premier accounts globally with free money transfers between them. HSBC Advance provides a range of preferential products and services customized to meet local needs. With a telephone service, access to wealth advice and online tools to support financial planning, it gives customers an online global view of their Advance accounts with money transfers between them. Wealth Solutions & Financial Planning process designed for global individual customer needs to help its clients to protect, grow and manage their wealth through investment and wealth insurance products manufactured by in-house partners, including Global Asset Management, Global Markets and HSBC Insurance, and by selected third party providers. During 2010, PFS provided 92 million individual and self-employed customers with financial services in over 60 markets globally.

Commercial Banking

The Company ! segments ! its CMB business into Corporate, to serve both Corporate and Mid-Market companies, and Business Banking, to serve the small and medium-sized enterprises (SME��) sector. It provides support to companies as they expand both domestically and internationally, and ensures a focus on the business banking segments. It offers a range of financing, both domestic and cross-border, including overdrafts, receivables finance, term loans and syndicated, leveraged, acquisition and project finance. Asset finance is offered in selected sites, focused on leasing and instalment finance for vehicles, plant and equipment. It is a provider of domestic and cross-border payments and collections, liquidity management and account services globally, delivered through its e-platform, HSBC net. It provides international trade products and services, to both buyers and suppliers, such as export finance, guarantees, documentary collections and forfeiting to improve efficiency and help mitigate risk throughout the supply chain.

CMB customers are volume users of its foreign exchange, derivatives and structured products. Capital markets & advisory is raising capital on debt and equity markets and provide advisory services. Commercial cards issuing helps customers enhance cash management, credit control and purchasing. Card acquiring services enable merchants to accept credit and debit card payments in person or remotely. CMB offers key person, employee benefits and a range of commercial risk insurance, such as property, cargo and trade credit. Direct channels include online and direct banking offerings, such as telephone banking, HSBCnet and Business Internet Banking.

Global Banking and Markets

GB&M provides tailored financial solutions to government, corporate and institutional clients and private investors globally. Managed as a global business, GB&M operates a long-term relationship management approach to build a understanding of clients��financial requirements. Sector-focused client service! teams co! nsisting of relationship managers and product specialists develop financial solutions to meet individual client needs. GB&M is managed as four principal business lines: Global Markets, Global Banking, Global Asset Management and Principal Investments.

Global Markets operations consist of treasury and capital markets services. Products include foreign exchange; currency, interest rate, bond, credit, equity and other derivatives; government and non-government fixed income and money market instruments; precious metals and exchange-traded futures; equity services; distribution of capital markets instruments, and securities services, including custody and clearing services and funds administration to both domestic and cross-border investors. Global Banking offers financing, advisory and transaction services. Its products include capital raising, advisory services, bilateral and syndicated lending, leveraged and acquisition finance, structured and project finance, lease finance and non-retail deposit taking; international, regional and domestic payments and cash management services; and trade services for large corporate clients.

Global Asset Management offers investment solutions to institutions, financial intermediaries and individual investors globally. Principal Investments includes its relationships with third-party private equity managers and other investments. GB&M is a global business, which provides financial solutions to government, corporate and institutional clients globally.

Global Private Banking

GPB works with the Company�� high net worth clients to offer ways to manage and preserve wealth. HSBC Private Bank is the principal marketing name of its international private banking business, GPB. GPB works with its clients to offer both ways to manage and preserve wealth while optimising returns. GPB accesses six advisory centers in Hong Kong, Singapore, Geneva, New York, Paris and London. Private Banking services consist of multi-currency depo! sit accou! nts and fiduciary deposits, credit and specialist lending, treasury trading services, cash management, securities custody and clearing. GPB works to ensure that its clients have access to other products and services available in HSBC, such as credit cards, Internet banking, corporate banking and investment banking.

Private Wealth Management consists of both advisory and discretionary investment services. A range of investment vehicles is covered, including bonds, equities, derivatives, options, futures, structured products, mutual funds and alternatives (hedge funds, private equity and real estate). Corporate Finance Solutions helps provide clients with solutions for their companies, working in conjunction with GB&M. Private Wealth Solutions consist of planning, trustee and other fiduciary services to protect wealth and preserve it for future generations. Its expertise includes trusts, foundation and company administration, charitable trusts and foundations, insurance, family office advisory and philanthropy.

Other

The Company�� Other contains the results of certain property transactions and unallocated investment activities. It also includes centrally held investment companies, movements in fair value of own debt, HSBC�� holding company and financing operations.

Advisors' Opinion:

• [By John Maxfield]

  To be fair, Bank of America is far from the only bank that's been accused of blatant misdeeds over the last few years. Both Citigroup (NYSE: C  ) and JPMorgan Chase (NYSE: JPM  ) are purportedly under investigation for their involvement in a scandal to manipulate the London interbank offered rate, or LIBOR. And the British banking behemoth HSBC (NYSE: HBC  ) settled a case earlier this year that alleged that it illegally conducted transactions on behalf of Mexican drug lords, terrorists, and customers in places like Iran, Libya, and Sudan, among others.

• [By Alan Oscroft]

  HSBC (LSE: HSBA  ) (NYSE: HBC  )
  On May 7, HSBC Holdings announced a first-quarter dividend of $0.10 per share. As has been the company's policy since its last annual report, it will pay an equal dividend for each of the first three quarters, with the final dividend being variable. The latest City forecasts suggest a full-year payout of about 33 pence per share, which would be about 14% up on last year.

• [By Sara Sjolin]

  Banks also added pressure in London, with shares of Barclays PLC (UK:BARC) � (BCS) �down 1.4%, Standard Chartered PLC (UK:STAN) �of down 0.9% and heavyweight HSBC Holdings PLC (UK:HSBA) (HBC) (HK:5) �0.2% lower.

• [By Jill Ralph]

  LONDON --�HSBC Holdings� (LSE: HSBA  ) (NYSE: HBC  ) reported today that underlying profits surged 34% (from $2.58 billion to $6.35 billion) in the first quarter as bad loans fell and business and mortgage borrowing picked up pace.

Best China Companies To Own In Right Now: Citigroup Inc.(C)

Citigroup, Inc., a global financial services company, provides consumers, corporations, governments, and institutions with a range of financial products and services. The company operates through two segments, Citicorp and Citi Holdings. The Citicorp segment operates as a global bank for businesses and consumers with two primary businesses, Regional Consumer Banking and Institutional Clients Group. The Regional Consumer Banking business provides traditional banking services, including retail banking, and branded cards in North America, Asia, Latin America, Europe, the Middle East, and Africa. The Institutional Clients Group business provides securities and banking services comprising investment banking and advisory services, lending, debt and equity sales and trading, institutional brokerage, foreign exchange, structured products, cash instruments and related derivatives, and private banking; and transaction services consisting of treasury and trade solutions, and securiti es and fund services. The Citi Holdings segment operates Brokerage and Asset Management, Local Consumer Lending, and Special Asset Pool businesses. The Brokerage and Asset Management Business, through its 49% stake in Morgan Stanley Smith Barney joint venture and Nikko Cordial Securities, offers retail brokerage and asset management services. The Local Consumer Lending business provides residential mortgage loans, retail partner card loans, personal loans, commercial real estate, and other consumer loans, as well as western European cards and retail banking services. The Special Asset Pool business is a portfolio of securities, loans, and other assets. Citigroup Inc. has approximately 200 million customer accounts and operates in approximately 160 countries. The company was founded in 1812 and is based in New York, New York.

Advisors' Opinion:

• [By Ben Levisohn]

  Citigroup (C) has dropped 2.5% to $49.92 this morning after the Financial Times reported it had experienced a big drop in trading revenue.

  Rockwell Collins (COL) has fallen 2.6% to $68.21 after it was downgraded to Neutral from Outperform at Credit Suisse.

• [By Morgan Housel]

  Take Robert Rubin, former chairman of the executive committee at Citigroup (NYSE: C  ) . Paid $126 million to keep an eye on the bank, Rubin was one of the highest paid bankers in the country during the early 2000s. Yet when Citigroup began choking on pools of toxic CDOs, he admitted sheer ignorance. "Myself, at that point, I had no familiarity at all with CDOs," he told CNNMoney in 2007.

• [By Amanda Alix]

  Additionally, the five top lenders, Ally Financial, Bank of America (NYSE: BAC  ) , Citigroup (NYSE: C  ) , JPMorgan Chase (NYSE: JPM  ) , and Wells Fargo (NYSE: WFC  ) , have mostly fulfilled�the terms of the National Mortgage Settlement, the $25 billion mortgage-fraud pact signed last February. Without the added requirements of that pact slowing them down, banks are able to process foreclosures more quickly these days. Of the signatories, only Citi�did not increase the number of repossessions last month.

• [By John Grgurich]

  Less then three hours till the closing bell, and Citigroup (NYSE: C  ) is down 0.32% for the day but up 5.71% for the week. The story is similar for the rest of the Big Four banks and for the broader markets, as well. We seem to be at the start of yet another market correction. Let's hope it's a mild one.

Top 10 Bank Companies To Watch In Right Now: EverBank Financial Corp (EVER)

EverBank Financial Corp, incorporated in 2004, is an unitary savings and loan holding company. The Company provides a range of financial products and services directly to customers through multiple business channels. Its operating subsidiary is EverBank. As of December 31, 2011, EverBank had $ 10.3 billion deposits. EverBank offers a range of banking, lending and investing products to consumers and businesses. EverBank provides services to customers through Websites, over the phone, through the mail and at 14 Florida-based Financial Centers. The Company operates in two operating business segments: Banking and Wealth Management, and Mortgage Banking. Its Banking and Wealth Management segment includes earnings generated by and activities related to deposit and investment products and services and portfolio lending and leasing activities. Its Mortgage Banking segment consists of activities related to the origination and servicing of residential mortgage loans. In April 2012, the Company acquired MetLife Bank�� warehouse finance business. In October 2012, it acquired Business Property Lending, Inc.

Asset Origination and Fee Income Businesses

The Company has a range of asset origination and fee income businesses. The Company generates generate fee income from its mortgage banking activities, which consist of originating and servicing one-to-four family residential mortgage loans. It originates prime residential mortgage loans using a centrally controlled underwriting, processing and fulfillment infrastructure through financial intermediaries (including community banks, credit unions, mortgage bankers and brokers), consumer direct channels and financial centers. Its mortgage origination activities include originating, underwriting, closing, warehousing and selling to investors prime conforming and jumbo residential mortgage loans. From its mortgage origination activities, it earns fee-based income on fees charged to borrowers and other noninterest income from gains on sales from ! mortgage loans and servicing rights. During the year ended December 31, 2011, it originated six billion dollars of residential loans. It generates mortgage servicing business through the retention of servicing from its origination activities, acquisition of bulk mortgage servicing rights (MSR) and related servicing activities.

The Company�� mortgage servicing business includes collecting loan payments, remitting principal and interest payments to investors, managing escrow funds for the payment of mortgage-related expenses, such as taxes and insurance, responding to customer inquiries, counseling delinquent mortgagors, supervising foreclosures and liquidations of foreclosure properties and otherwise administering its mortgage loan servicing portfolio. It earns mortgage servicing fees and other ancillary fee-based income in connection with these activities. It services a portfolio by both product and investor, including agency and private pools of mortgages secured by properties throughout the United States. As of December 31, 2011, its mortgage servicing business, which services mortgage loans for itself and others, managed loan servicing administrative functions for loans with unpaid principal balance (UPB) of $54.8 billion.

The Company originates originate equipment leases nationwide through relationships with approximately 280 equipment vendors with networks of creditworthy borrowers and provide asset-backed loan facilities to other leasing companies. Its equipment leases and loans finance essential-use health care, office product, technology and other equipment. Its commercial financings range from approximately $25,000 to $1.0 million per transaction, with typical lease terms ranging from 36 to 60 months. Its commercial finance activities provide it with access to approximately 25,000 small business customers nationwide, which creates opportunities to cross-sell its deposit, lending and wealth management products. It focuses to offer warehouse loans, which are short-ter! m revolvi! ng facilities, primarily securitized by agency and government collateral. It provides financial advisory, planning, brokerage, trust and other wealth management services to its mass-affluent and high-net-worth customers through its registered broker dealer and recently-formed registered investment advisor subsidiaries.

Interest-Earning Asset Portfolio

As of December 31, 2011, the Company�� interest-earning assets were $11.7 billion. As of December 31, 2011, its loan and lease held for investment portfolio was $6.5 billion. As of December 31, 2011, the carrying values of its interest-earning assets are: residential, government-insured (residential), securities, commercial and commercial real estate, Bank of Florida (covered), lease financing receivables, and other.

Residential includes primarily prime loans originated and retained from its mortgage banking activities, acquired from third parties or held for sale to other investors. government-insured (residential) includes Government National Mortgage Association (GNMA) pool buyouts with government insurance, sourced from its mortgage banking segment and third-party sources. Securities include non-agency residential mortgage-backed securities (MBS) and collateralized mortgage obligation (CMO) purchased at significant discounts. This portfolio includes protection against credit losses from purchase discounts, subordination in the securities structures and borrower equity. Commercial and commercial real estate includes a range of commercial loans, including owner-occupied commercial real estate, commercial investment property and small business commercial loans. As of December 31, 2011, Bank of Florida (Covered) includes commercial, multi-family and commercial real estate loans with $71.3 million of purchase discounts. Lease financing receivables include covered lease financing receivables. As of December 31, 2011, the lease portfolio had $64.7 million of total discounts. Other includes home equity loans and lines ! of credit! , consumer and credit card loans and other investments.

Deposit Generation

As of December 31, 2011, the Company had approximately $10.3 billion in deposits. Its market-based deposit products, consisting of its WorldCurrency, MarketSafe and EverBank Metals Select products, provide investment capabilities for customers seeking portfolio diversification with respect to foreign currencies, commodities and other indices. Its financial portal includes online bill-pay, account aggregation, direct deposit, single sign-on for all customer accounts and other features. Its Website and mobile device applications provide information on its product offerings, financial tools and calculators, newsletters, financial reporting services and other applications for customers to interact with it and manages all of their EverBank accounts on a single integrated platform. Its new mobile applications allow customers using iPhone, iPad, Android and Blackberry devices to view account balances, conduct real time balance transfers between EverBank accounts, administer billpay, review account activity detail and remotely deposit checks.

The Company generates deposit customer relationships through its consumer direct, financial center and financial intermediary distribution channels. Its consumer direct channel includes Internet, e-mail, telephone and mobile device access to product and customer support offerings. Its direct distribution with a network of 14 financial centers in Florida metropolitan areas, include Jacksonville, Naples, Ft. Myers, Miami, Ft. Lauderdale, Tampa Bay and Clearwater. As of December 31, 2011, its financial centers had average deposits of $130.5 million, which is approximately double the industry average. In addition, it generates noninterest-bearing escrow deposits from its mortgage servicing business.

Top 10 Bank Companies To Watch In Right Now: Wells Fargo & Company(WFC)

Wells Fargo & Company, through its subsidiaries, provides retail, commercial, and corporate banking services primarily in the United States. The company operates in three segments: Community Banking; Wholesale Banking; and Wealth, Brokerage, and Retirement. The Community Banking segment offers deposits, including checking, market rate, and individual retirement accounts; savings and time deposits; and debit cards. Its loan products comprise lines of credit, auto floor plans, equity lines and loans, equipment and transportation loans, education loans, residential mortgage loans, health savings accounts, and credit cards. This segment also provides equipment leases, real estate financing, small business administration financing, venture capital financing, cash management, payroll services, retirement plans, loans secured by autos, and merchant payment processing services; purchases sales finance contracts from retail merchants; and a family of funds, and investment managemen t services. The Wholesale Banking segment offers commercial and corporate banking products and services, including commercial loans and lines of credit, letters of credit, asset-based lending, equipment leasing, international trade facilities, trade financing, collection services, foreign exchange services, treasury and investment management, institutional fixed-income sales, commodity and equity risk management, insurance, corporate trust fiduciary and agency services, and investment banking services. This segment also provides banking products for commercial real estate market, and real estate and mortgage brokerage services. The Wealth, Brokerage, and Retirement segment offers financial advisory, brokerage, and institutional retirement and trust services. As of December 31, 2010, the company served its customers through approximately 9,000 banking stores in 39 States and the District of Columbia. Wells Fargo & Company was founded in 1929 and is headquartered in San Franci sco, California.

Advisors' Opinion:

• [By John Grgurich]

  Really, you shouldn't have
  On Wednesday, the Financial Stability Oversight Council designated AIG a SIFI, or "systemically important financial institution." Other American financial giants currently designated SIFIs include Bank of America (NYSE: BAC  ) , Citigroup (NYSE: C  ) , Wells Fargo (NYSE: WFC  ) , and JPMorgan Chase (NYSE: JPM  ) .�

• [By John Maxfield]

  On the other hand, the low supply in the housing market, thanks largely to the 20% to 25% of homeowners who are still underwater, would suggest that things should continue to improve irrespective of increasing interest rates. And on top of this, in a perverse way, the higher interest rates may even spur more homeowners to buy sooner rather than later. As a prospective homebuyer told CNBC's Diana Olick recently, "I'm afraid we're going to miss the boat." If this is true, it could amount to a massive boost to mortgage lenders such as Wells Fargo (NYSE: WFC  ) , which underwrites an estimated one in three domestic mortgages, and homebuilders such as D.R. Horton (NYSE: DHI  ) , which builds more houses than any other company in America. Suffice it to say, it would also provide stimulus to more peripheral operators such as Home Depot (NYSE: HD  ) , the nation's largest home-improvement retailer. In its most recent earnings, in fact, the company increased its revenue and earnings projections going forward for this very reason.

Top 10 Bank Companies To Watch In Right Now: Signature Bank (SBNY)

Signature Bank (the Bank) is a full-service commercial bank with 25 private client offices located in the New York metropolitan area serving the needs of privately owned business clients and their owners and senior managers. The Bank offers a variety of business and personal banking products and services through the Bank, as well as investment, brokerage, asset management and insurance products and services through its wholly owned subsidiary, Signature Securities Group Corporation (Signature Securities), a licensed broker-dealer and investment adviser. Through Signature Securities, it also purchases, securitizes and sells the guaranteed portions of the United States Small Business Administration (SBA) loans. The Bank offers a variety of deposit, escrow deposit, credit, cash management, investment and insurance products and services to its clients. As of December 31, 2011, the Bank maintained approximately 78,000 deposit accounts, 6,900 investment accounts, 8,600 loan accounts and 14,300 client relationships. In April 2012, it formed a new subsidiary, Signature Financial, LLC.

The Bank offers a range of products and services oriented to the needs of its business clients, including deposit products, such as non-interest-bearing checking accounts, money market accounts and time deposits; escrow deposit services; cash management services; commercial loans and lines of credit for working capital and to finance internal growth, acquisitions and leveraged buyouts; permanent real estate loans; letters of credit; investment products to help better manage idle cash balances, including money market mutual funds and short-term money market instruments; business retirement accounts, such as 401(k) plans, and business insurance products, including group health and group life products. It offers a range of products and services oriented to the needs of its high net worth personal clients, including interest-bearing and non-interest-bearing checking accounts, with optional features, such as debit/ autom! ated teller machine (ATM) cards and overdraft protection and, for its clients, rebates of certain charges, including ATM fees; money market accounts and money market mutual funds; time deposits; personal loans, both secured and unsecured; mortgages, home equity loans and credit card accounts; investment and asset management services, and personal insurance products, including health, life and disability.

Lending Activities

The Bank�� commercial and industrial (C&I) loan portfolio is consisted of lines of credit for working capital and term loans to finance equipment, company owned real estate and other business assets, along with commercial overdrafts. Its lines of credit for working capital are generally renewed on an annual basis and its term loans generally have terms of 2 to 5 years. The Bank�� lines of credit and term loans typically have floating interest rates, and as of December 31, 2011, approximately 61% of its outstanding C&I loans were variable rate loans. As of December 31, 2011, funded C&I loans totaled approximately 15% of its total funded loans. The Bank�� real estate loan portfolio includes loans secured by commercial and residential properties. It also provides temporary financing for commercial and residential property. As of December 31, 2011, funded real estate loans totaled approximately $5.74 billion, representing approximately 80% of its total funded loans. It issues standby or performance letters of credit, and can service the international needs of its clients through correspondent banks. As of December 31, 2011, its commitments under letters of credit totaled approximately $235.7 million. Its personal loan portfolio consists of personal lines of credit and loans to acquire personal assets. As of December 31, 2011, its consumer loans totaled $11.8 million, representing less than 1% of its total funded loans.

Investment and Asset Management Products and Services

Investment and asset management products and services are ! provided ! through the Bank�� subsidiary, Signature Securities. Signature Securities is a licensed broker-dealer. Signature Securities is an introducing firm and, as such, clears its trades through National Financial Services, Inc., a wholly owned subsidiary of Fidelity Investments. Signature Securities is also registered as an investment adviser in New York, New Jersey, Pennsylvania and Florida. It offers an array of asset management and investment products, including the ability to purchase and sell all types of individual securities, such as equities, options, fixed income securities, mutual funds and annuities. The Bank offers transactional, cash management type brokerage accounts with check writing and daily sweep capabilities. It also offers retirement products, such as individual retirement accounts (IRAs) and administrative services for retirement vehicles, such as pension, profit sharing, and 401(k) plans to its clients. Signature Securities offers wealth management services to its high net worth personal clients. Together with its client and their other professional advisors, including attorneys and certified public accountants, it develops a financial plan that can include estate planning, business succession planning, asset protection, investment management, family office advisory services, bill payment, art and collectible advisory services and concentrated stock services.

Sources of Funds

The Bank offers a variety of deposit products to its clients. Its business deposit products include commercial checking accounts, money market accounts, escrow deposit accounts, lockbox accounts, cash concentration accounts and other cash management products. Its personal deposit products include checking accounts, money market accounts and certificates of deposit. The Bank also allows its personal and business deposit clients to access their accounts, transfer funds, pay bills and perform other account functions over the Internet and through ATM machines. As of December 31, 2011, it main! tained ap! proximately 78,000 deposit accounts representing $11.70 billion in client deposits, excluding brokered deposits.

Insurance Services

The Bank offers its business and private clients an array of individual and group insurance products, including health, life, disability and long-term care insurance products through its subsidiary, Signature Securities. The Bank does not underwrite insurance policies. It only acts as an agent in offering insurance products and services underwritten by insurers.

Top 10 Bank Companies To Watch In Right Now: Banco Bilbao Vizcaya Argentaria S.A. (BBVA)

Banco Bilbao Vizcaya Argentaria, S.A. (BBVA) is a diversified international financial group, with strengths in the traditional banking businesses of retail banking, asset management, private banking and wholesale banking. The Company also has investments in some of Spain�� companies. During the year ended December 31, 2009, BBVA focused its operations on six major business areas: Spain and Portugal, Wholesale Banking and Asset Management, Mexico, The United States, South America and Corporate Activities. On August 21, 2009, through its subsidiary BBVA Compass, BBVA acquired certain assets of Guaranty from the United States Federal Deposit Insurance Corporation (the FDIC).

Spain and Portugal

The Spain and Portugal business area focuses on providing banking services and consumer finance to private individuals, enterprises and institutions in Spain and Portugal. The main business units included in the Spain and Portugal area Spanish Retail Network, which manages individual customers, high net-worth individuals (private banking) and small companies and retailers in the Spanish market; Corporate and Business Banking, which manages business with small and medium enterprises (SMEs), large companies, institutions and developers in the Spanish market, and Other units, which includes consumer finance, that manages renting and leasing business, credit to individual and to enterprises for consumer products and Internet banking; European Insurance that manages the insurance business in Spain and Portugal, and BBVA Portugal, that manages the banking business in Portugal. The Spanish Retail Network unit services the financial and non-financial needs of households, professional practices, retailers and small businesses. The Corporate and Business Banking unit offers a range of services and products to SMEs, large companies, institutions and developers with specialized branch networks for each segment.

The Company�� European Insurance unit�� activities are conducted through! various insurance companies that provide direct insurance, reinsurance and insurance brokering services in Spain and Portugal and market products for different types of customers (private individuals, SMEs, retailers, professional service firms and providers and self-employed individuals) through this unit�� branch offices. BBVA Portugal manages its banking business in Portugal.

Wholesale Banking and Asset Management

The Wholesale Banking and Asset Management area focuses on providing services to large international companies and investment banking, capital markets and treasury management services to clients. The business units included in the Wholesale Banking and Asset Management area are Corporate and Investment Banking, which coordinates origination, distribution and management of a complete catalogue of corporate and investment banking products (corporate finance, structured finance, syndicated loans and debt capital markets) and provides global trade finance and global transaction services with coverage of large corporate customers specialized by sector (industry bankers); Global Markets, which handles the origination, structuring, distribution and risk management of market products, which are placed through its trading rooms in Europe, Asia and the Americas; Asset Management, which designs and manages the products that are marketed through its different branch networks including traditional asset management, alternative asset management and Valanza (its private equity unit); Industrial and Other Holdings, which helps to diversify the area�� businesses with the aim of creating medium and long-term value through active management of a portfolio of industrial holdings and other Spanish and international projects, and Asia.

During the year ended December 31, 2009, it launched two products: BBVA Bonos Cash (BBVA Cash Bonds), a money market fund for retail customers, and BBVA Bonos Largo Plazo Gobiernos II (BBVA Long-Term Government Bonds), a public-debt fu! nd. In ad! dition it launched through this unit additional fixed-income long-term funds, including BBVA Bonos Corporativos 2011 and BBVA Bonos 2014, which were sold to HNWI customers.

Mexico

The business units included in the Mexico area are Retail and Corporate banking and Pensions and Insurance. BBVA Bancomer launched six new mortgage products for lending to home buyers in 2009. These products included: loans for home improvements, remodeling or additions to homes and financial discount which provides liquidity to construction companies. In Mexico, it operates its pensions business through Afore Bancomer, its insurance business through Seguros Bancomer, its annuities business through Pensiones Bancomer and its health insurance business through Preventis.

The United States

The business units included in the United States area are BBVA Compass and Other units: BBVA Puerto Rico and Bancomer Transfers Services (BTS). During 2009 this unit marketed and sold several new products, The ClearPoints credit card, Business Build-to-order Checking, Compass for your Cause and Money Market Sweep.

South America

The South America business area includes its banking, insurance and pension businesses in South America. The business units included in the South America business area are Retail and Corporate Banking, which includes banks in Argentina, Chile, Colombia, Panama, Paraguay, Peru, Uruguay and Venezuela; Pension businesses, which includes pensions businesses in Argentina, Bolivia, Chile, Colombia, Ecuador and Peru and Dominican Republic, and Insurance businesses, which includes insurance businesses in Argentina, Chile, Colombia, Dominican Republic and Venezuela.

Corporate Activities

The Corporate Activities area handles its general management functions. These mainly consist of structural positions for interest rates associated with the euro balance sheet and exchange rates, together with liquidity management and shareholde! rs��fun! ds.

Advisors' Opinion:

• [By Lee Jackson]

  Banco Bilbao Vizcaya Argentaria S.A. (NYSE: BBVA) was raised to Outperform from Neutral by Credit Suisse.

  Caterpillar Inc. (NYSE: CAT) was started as Equal Weight at Morgan Stanley

Top 10 Bank Companies To Watch In Right Now: Itau Unibanco Holding SA (ITUB)

Itau Unibanco Holding S.A., incorporated on September 9, 1943, is a bank in Brazil. The Company has four operational segments: Commercial Banking, Itau BBA, Consumer Credit and Corporate and Treasury. Commercial banking, including insurance, pension plan and capitalization products, credit cards, asset management and a variety of credit products and services for individuals, small and middle-market companies). Itau BBA includes corporate and investment banking. Consumer credit includes financial products and services to its non-accountholders. Corporate and treasury includes the results related to the trading activities in its portfolio, trading related to managing currency, interest rate and other market risk factors, gap management and arbitrage opportunities in domestic and foreign markets. It also includes the results associated with financial income from the investment of its excess capital.

On October 24, 2010, Itau Unibanco completed the integration of customer service locations throughout Brazil. In total, 998 branches and 245 customer site branches (CSB) of Unibanco were redesigned and integrated as Itau Unibanco customer service locations, thus creating a network of approximately 4,700 units in the country under the Itau brand. The Company is a financial holding company controlled by Itau Unibanco Participacoes S.A. (IUPAR). As of December 31, 2010, it had a network of 3,747 service branches throughout Brazil. As of December 31, 2010, it operated 913 CSBs throughout Brazil. As of December 31, 2010, it operated 28,844 automated teller machines (ATMs) throughout Brazil.

Commercial banking

The commercial banking segment offers a range of banking services to a diversified base of individuals and companies. Services offered by the commercial banking segment include insurance, pension plan and capitalization products, credit cards, asset management, credit products and customized products and solutions. The commercial banking segment comprises the specialized! areas and products, such as retail banking (individuals); public sector banking; personnalite (banking for high-income individuals); private banking (banking and financial consulting for wealthy individuals); very small business banking; small business banking; middle-market banking; credit cards; real estate financing; asset management; corporate social responsibility fund; securities services for third parties; brokerage, and insurance, private retirement and capitalization products.

The Company�� credit products include personal loans, overdraft protection, payroll loans, vehicles, credit cards, mortgage and agricultural loans, working capital, trade note discount and export. Its investments products include pension plans, mutual funds, time deposits, demand deposit accounts, savings accounts and capitalization plans. Its services include insurance (life, home, credit/cash cards, vehicles, loan protection, among others), exchange, brokerage and others. Its core business is retail banking, which serves individuals with a monthly income below R$7,000. In October 2010, it completed the conversion of branches under the Unibanco brand to the Itau brand and as of December 31, 2010, it had over 15.2 million customers and 4,660 branches and CSBs. Its public sector business operates in all areas of the public sector, including the federal, state and municipal governments (in the executive, legislative and judicial branches). As of December 31, 2010, it had approximately 2,300 public sector customers. Itau Personnalite�� focus is delivering financial advisory services by its managers, who understand the specific needs of its higher-income customers; a portfolio of exclusive products and services; special benefits based on the type and length of relationship with the customer, including discounts on various products and services. Itau Personnalite�� customer base reached more than 600,000 individuals as of December 31, 2010. Itau Personnalite customers also have access to Itau Unibanco netwo! rk of bra! nches and ATMs throughout the country, as well as Internet banking and phone.

Itau Private Bank is a Brazilian bank in the global private banking industry, providing wealth management services to approximately 17,951 Latin American clients as of December 31, 2010. The Company serves its customers��needs for offshore wealth management solutions in major jurisdictions through independent institutions in the United States through Banco Itau Europa International and Itau Europa Securities , in Luxembourg through Banco Itau Europa Luxembourg S.A. , in Switzerland through Banco Itau Suisse , in the Bahamas through BIE Bank & Trust Bahamas and in Cayman through Unicorp Bank & Trust Cayman. As of December 31, 2010, it had over 565 very small business banking offices located throughout Brazil and approximately 2,500 managers working for over 1,235,000 small business customers. Loans to very small businesses totaled R$5,981 million as of December 31, 2010. As of December 31, 2010, it had 374 small business banking offices located nationwide in Brazil and nearly 2,500 managers who worked for over 525,000 companies. Loans to small businesses totaled R$28,744 million as of December 31, 2010.

As of December 31, 2010, it had approximately 115,000 middle-market corporate customers that represented a range of Brazilian companies located in over 83 cities in Brazil. The Company offers a range of financial products and services to middle-market customers, including deposit accounts, investment options, insurance, private retirement plans and credit products. Credit products include investment capital loans, working capital loans, inventory financing, trade financing, foreign currency services, equipment leasing services, letters of credit and guarantees. The Company also carries out financial transactions on behalf of middle-market customers, including interbank transactions, open market transactions and futures, swaps, hedging and arbitrage transactions. It also offers its middle-market custom! ers colle! ction services and electronic payment services. The Company is able to provide these services for virtually any kind of payment, including Internet office banking. It charges collection fees and fees for making payments, such as payroll, on behalf of its customers.

The Company is engaged in the Brazilian credit card market. Its subsidiaries, Banco Itaucard S.A. (Banco Itaucard) and Hipercard Banco Multiplo S.A. (Hipercard), offers a range of products to 26 million customers as of December 31, 2010, including both accountholders and non-accountholders. As of December 31, 2010, it had approximately R$16,271 million in outstanding real estate loans. As of December 31, 2010, it had total net assets under management of R$291,748 million on behalf of approximately 2.1 million customers. The Company also provides portfolio management services for pension funds, corporations, private bank customers and foreign investors. As of December 31, 2010, it had R$184,496 million of assets under management for pension funds, corporations and private bank customers. As of December 31, 2010, the Company offered and managed about 1,791 mutual funds, which are mostly fixed-income and money market funds. For individual customers, it offered 154 funds to its retail customers and approximately 287 funds to its Itau Personnalite customers. Private banking customers may invest in over 600 funds, including those offered by other institutions. Itau BBA�� capital markets group also provides tailor-made mutual funds to institutional, corporate and private banking customers.

The Company provides securities services in the Brazilian capital markets. Its services also include acting as transfer agent, providing services relating to debentures and promissory notes, custody and control services for mutual funds, pension funds and portfolios, providing trustee services and non-resident investor services, and acting as custodian for depositary receipt programs. The Company also provides brokerage services to inte! rnational! customers through its broker-dealer operations in New York, through its London branch, and through its broker-dealers in Hong Kong and Dubai. Its main lines of insurance are life and casualty (excluding Vida Gerador de Benefucio Livre), extended warranties and property. Its policies are sold through its banking operations, independent local brokers, multinational brokers and other channels. As of December 31, 2010, it had 9.9 million in capitalization products outstanding, representing R$2,620 million in liabilities with assets that function as guarantees of R$2,646 million. The Company distributes these products through its retail network, Itau Personnalite and Itau Uniclass branches, electronic channels and ATMs. These products are sold by its subsidiary, Cia. Itau de Capitalizacao S.A.

Itau BBA

Itau BBA is responsible for its corporate and investment banking activities. As of December 31, 2010, Itau BBA offered a portfolio of products and services to approximately 2,400 companies and conglomerates in Brazil. Itau BBA�� activities range from typical operations of a commercial bank to capital markets operations and advisory services for mergers and acquisitions. As of December 31, 2010, its corporate loan portfolio was R$ 76,584 million. In investment banking, the fixed income department was responsible for the issuance of debentures and promissory notes that totaled R$18,888 million and securitization transactions that amounted to R$4,677 million in Brazil in 2010. In addition, Itau BBA advised 35 merger and acquisition transactions with an aggregate deal volume of R$16,973 million in 2010.

Itau BBA is also active in Banco Nacional de Desenvolvimento Economico e Social (BNDES) on-lending to finance large-scale projects, aiming at strengthening domestic infrastructure. In consolidated terms, total loans granted by Itau BBA under BNDES on-lending represented more than R$9,010 million in 2010. Itau BBA focuses on the products and initiatives in the international ! business ! unit, such as structuring long-term, bilateral and syndicated financing, and spot foreign exchange. In addition, in 2010 Itau BBA continued to offer a large number of lines of credit for foreign trade.

Consumer Credit

As of December 31, 2010, its portfolio of vehicle financing, leasing and consortium lending consisted of approximately 3.8 million contracts, of which approximately 71.1% were non-accountholder customers. The personal loan portfolio relating to vehicle financing and leasing reached R$60,254 million in 2010. The Company leased and financed vehicles through 13,706 dealers as of December 31, 2010. Sales are made through computer terminals installed in the dealerships that are connected to its computer network. Redecard S.A. (Redecard) is a multibrand credit card provider in Brazil, also responsible for the capturing, transmission, processing and settlement of credit, debit and benefit card transactions. As of December 31, 2010, the Company held approximately 50% interest in Redecard�� capital stock.

The Company competes with Bradesco, Banco do Brasil S.A. (Banco do Brasil), Banco Santander, Caixa Economica Federal (CEF), BNDES, HSBC, Banco Citibank S.A, Banco de Investimentos Credit Suisse (Brasil) S.A., Banco JP Morgan S.A., Banco Morgan Stanley S.A., Banco Merrill Lynch de Investimentos S.A., Banco BTG Pactual S.A., Banco Panamericano S.A, Citibank S.A., Banco GE Capital S.A. and Banco Ibi S.A.

Top 10 Bank Companies To Watch In Right Now: Federal National Mortgage Association (FNMA.OB)

Federal National Mortgage Association (Fannie Mae) is a government-sponsored enterprise (GSE) chartered by the United States Congress to support liquidity and stability in the secondary mortgage market, where mortgage-related assets are purchased and sold. The Company�� activities include providing market liquidity by securitizing mortgage loans originated by lenders in the primary mortgage market into Fannie Mae mortgage-backed securities (Fannie Mae MBS), and purchasing mortgage loans and mortgage-related securities in the secondary market for its mortgage portfolio. Fannie Mae operates in three business segments: Single-Family business, Multifamily Business (formerly Housing and Community Development (HCD)) and Capital Markets group. Its Single-Family Credit Guaranty and Multifamily businesses work with its lender customers to purchase and securitize mortgage loans customers deliver to the Company into Fannie Mae MBS.

The Company obtains funds to suppo rt its business activities by issuing a variety of debt securities in the domestic and international capital markets. Fannie Mae acquires funds to purchase mortgage-related assets for its mortgage portfolio by issuing a variety of debt securities in the domestic and international capital markets. It also makes other investments. Fannie Mae conducts its business in the United States residential mortgage market and the global securities market. It conducts business in the United States residential mortgage market and the global securities market. During the year ended December 31, 2011, the Company��

Single-Family Business

Single-Family business includes mortgage securitizations, mortgage acquisitions, credit risk management and credit loss management. Single-Family business works with the Company�� lender customers to provide funds to the mortgage market by securitizing single-family mortgage loans into Fannie Mae MBS. Its Single-Family business also works with its Capital Markets group to facilitate th! e! purchase of single-family mortgage loans for the Company�� mortgage portfolio. Fannie Mae�� Single-Family business prices and manages the credit risk on its single-family guaranty book of business, which consists of single-family mortgage loans underlying Fannie Mae MBS and single-family loans held in its mortgage portfolio. Single-Family business and Capital Markets group securitize and purchase primarily single-family fixed-rate or adjustable-rate, first lien mortgage loans, or mortgage-related securities backed by these types of loans.

The Company securitizes or purchases loans insured by Federal Housing Administration (FHA), loans guaranteed by the Department of Veterans Affairs (VA), and loans guaranteed by the Rural Development Housing and Community Facilities Program of the Department of Agriculture, manufactured housing loans, reverse mortgage loans, multifamily mortgage loans, subordinate lien mortgage loans and other mortgage-related securities. I ts Single-Family business securitizes single-family mortgage loans and issues single-class Fannie Mae MBS. Fannie Mae�� Single-Family business securitizes loans solely in lender swap transactions, in which lenders deliver pools of mortgage loans to the Company, which are placed immediately in a trust, in exchange for Fannie Mae MBS backed by these loans. Generally, the servicing of the mortgage loans held in its mortgage portfolio or that backs its Fannie Mae MBS is performed by mortgage servicers on the Company�� behalf. Lenders who sell single-family mortgage loans to Fannie Mae service these loans for the Company. For loans it owns or guarantees, the lender or servicer must obtain its approval before selling servicing rights to another servicer.

Fannie Mae�� mortgage servicers collect and deliver principal and interest payments, administer escrow accounts, monitor and report delinquencies, perform default prevention activities, evaluate transfers of own ership interests, respond to requests for partial releas! es o! f s! ecurit! y, and handle proceeds from casualty and condemnation losses. Its mortgage servicers are the primary point of contact for borrowers and perform implementation of its homeownership assistance initiatives, negotiation of workouts of troubled loans, and loss mitigation activities. Mortgage servicers also inspect and preserve properties and process foreclosures and bankruptcies.

Multifamily Mortgage Business

Multifamily business works with the Company�� lender customers to provide funds to the mortgage market by securitizing multifamily mortgage loans into Fannie Mae MBS. Through its Multifamily business, Fannie Mae provides liquidity and support to the United States multifamily housing market principally by purchasing or securitizing loans that finance multifamily rental housing properties. It also provides some limited debt financing for other acquisition, development, construction and rehabilitation activity related to projects that complement this business. Fannie Mae�� Multifamily business also works with its Capital Markets group to facilitate the purchase and securitization of multifamily mortgage loans and securities for Fannie Mae�� portfolio, as well as to facilitate portfolio securitization and resecuritization activities.

The Company�� multifamily guaranty book of business consists of multifamily mortgage loans underlying Fannie Mae MBS and multifamily loans and securities held in Fannie Mae�� mortgage portfolio. Revenues for Fannie Mae�� Multifamily business are derived from a variety of sources, including guaranty fees received as compensation for assuming the credit risk on the mortgage loans underlying multifamily Fannie Mae MBS and on the multifamily mortgage loans held in its portfolio and on other mortgage-related securities; transaction fees associated with the multifamily business, and other bond credit enhancement related fees. As with the servicing of single-family mortgages, multifamily mortgage servicing is performed by the ! lenders !! who sell ! the mortgages to the Company. Fannie Mae�� Multifamily business is organized and operated as an integrated commercial real estate finance business.

Capital Markets

Capital Markets group's primary business activities include mortgage and other investments, mortgage securitizations, structured mortgage securitizations and other customer services, and interest rate risk management. Capital Markets group manages the Company�� investment activity in mortgage-related assets and other interest-earning, non-mortgage investments. It funds its investments primarily through proceeds the Company receives from the issuance of debt securities in the domestic and international capital markets. Its business activity is focused on making short-term use of its balance sheet rather than long-term investments. Activities Fannie Mae is undertaking to provide liquidity to the mortgage market include whole loan conduit, early funding, real estate mortgage investment c onduit (REMICs) and other structured securitizations and dollar roll transactions. Whole loan conduit activities include its purchase of both single-family and multifamily loans principally for the purpose of securitizing them. During the year ended December 31, 2010, it was engaged in dollar roll activity. A dollar roll transaction is a commitment to purchase a mortgage-related security with a concurrent agreement to re-sell a similar security at a later date or vice versa.

Fannie Mae�� Capital Markets group is engaged in issuing both single-class and multi-class Fannie Mae MBS through both portfolio securitizations and structured securitizations involving third party assets. Its Capital Markets group creates single-class and multi-class Fannie Mae MBS from mortgage-related assets held in its mortgage portfolio. Fannie Mae�� Capital Markets group may sell these Fannie Mae MBS into the secondary market or may retain the Fannie Mae MBS in its investment portf olio. The Company�� Capital Markets group cr! eates sin! gle-c! lass and ! multi-class structured Fannie Mae MBS, for its lender customers or securities dealer customers, in exchange for a transaction fee. The Company�� Capital Markets group provides its lender customers and their affiliates with services that include offering to purchase a range of mortgage assets, including non-standard mortgage loan products; segregating customer portfolios to obtain optimal pricing for their mortgage loans, and assisting customers with hedging their mortgage business.

Although the Company�� Capital Markets group�� business activities are focused on short-term financing and investing, revenue from its Capital Markets group is derived primarily from the difference, or spread, between the interests it earns on its mortgage and non-mortgage investments and the interest it incurs on the debt the Company issues to fund these assets. Its Capital Markets revenues are primarily derived from the Company�� mortgage asset portfolio. Capital Markets gro up funds its investments primarily through the issuance of a variety of debt securities in a range of maturities in the domestic and international capital markets. Investors in the Company�� debt securities include commercial bank portfolios and trust departments, investment fund managers, insurance companies, pension funds, state and local governments, and central banks.

The Company competes with Freddie Mac, FHA and Ginnie Mae.

Top 10 Bank Companies To Watch In Right Now: Western Alliance Bancorporation (WAL)

Western Alliance Bancorporation (WAL) is a bank holding company. The Company provides full-service banking and lending to locally owned businesses, professional firms, real estate developers and investors, local non-profit organizations, high net worth individuals and other consumers through its three wholly owned subsidiary banks (the Banks): Bank of Nevada (BON), operating in Southern Nevada; Western Alliance Bank (WAB), operating in Arizona and Northern Nevada, and Torrey Pines Bank (TPB), operating in California. In addition, the Company�� non-bank subsidiaries, Shine Investment Advisory Services, Inc. (Shine) and Western Alliance Equipment Finance (WAEF), offer an array of financial products and services to small to mid-sized businesses and their proprietors, including financial planning, custody and investments, and equipment leasing nationwide. It operates in four segments: Bank of Nevada, Western Alliance Bank, Torrey Pines Bank and Other.

The Company provides a range of banking services, as well as investment advisory services, through its consolidated subsidiaries. As of December 31, 2011, WAL owned an 80% interest in Shine. As of December 31, 2011, the Company owned a 24.9% interest in Miller/Russell & Associates, Inc. (MRA), an investment advisor. MRA provides investment advisory services to individuals, foundations, retirement plans and corporations.

Lending Activities

Through the Company�� banking segments, the Company provides a variety of financial services to customers, including commercial real estate loans, construction and land development loans, commercial loans, and consumer loans. Loans to businesses consisted 89.2% of the total loan portfolio at December 31, 2011. Loans to finance the purchase or refinancing of commercial real estate (CRE) and loans to finance inventory and working capital that are additionally secured by CRE make up the majority of its loan portfolio. These CRE loans are secured by apartment buildings, professional of! fices, industrial facilities, retail centers and other commercial properties. As of December 31, 2011, 49% of its CRE loans were owner-occupied. Owner-occupied commercial real estate loans are loans secured by owner-occupied nonfarm nonresidential properties for which the primary source of repayment (more than 50%) is the cash flow from the ongoing operations and activities conducted by the borrower who owns the property. Non-owner-occupied commercial real estate loans are commercial real estate loans for which the primary source of repayment is nonaffiliated rental income associated with the collateral property.

Construction and land development loans include multi-family apartment projects, industrial/warehouse properties, office buildings, retail centers and medical facilities. Commercial and industrial loans include working capital lines of credit, inventory and accounts receivable lines, mortgage warehouse lines, equipment loans and leases, and other commercial loans. Commercial loans are primarily originated to small and medium-sized businesses in a variety of industries. Consumer loans are generally offered at a higher rate and shorter term than residential mortgages. Its consumer loans include home equity loans and lines of credit, home improvement loans, credit card loans, and personal lines of credit. As of December 31, 2011, its loan portfolio totaled $4.68 billion, or approximately 68.4% of its total assets.

Investment Activities

All of the Company�� investment securities are classified as available-for-sale (AFS) or held-to-maturity (HTM). As of December 31, 2011, the Company had an investment securities portfolio of $1.48 billion, representing approximately 21.7% of its total assets. As of December 31, 2011, its investment securities portfolio consisted of the United States Government sponsored agency securities, Municipal obligations, Adjustable-rate preferred stock, Mutual funds, Corporate bonds, Direct the United States obligation and government-! sponsored! enterprise (GSE) residential mortgage-backed securities, private label residential mortgage-backed securities, Community Reinvestment Act (CRA) investments, Trust preferred securities, Private label commercial mortgage-backed securities, and Collateralized debt obligations.

Sources of Funds

The Company offers a variety of deposit products, including checking accounts, savings accounts, money market accounts and other types of deposit accounts, including fixed-rate, fixed maturity retail certificates of deposit. As of December 31, 2011, the deposit portfolio consisted of 27.5% non-interest bearing deposits and 72.5% interest-bearing deposits. Non-interest bearing deposits consist of non-interest bearing checking account balances. In addition to its deposit base, it has access to other sources of funding, including Federal Home Loan Bank (FHLB) and Federal Reserve Bank (FRB) advances, repurchase agreements and unsecured lines of credit with other financial institutions.

Financial Products and Services

In addition to traditional commercial banking activities, the Company offers other financial services to customers, including Internet banking, wire transfers, electronic bill payment, lock box services, courier, and cash management services. Through Shine, a full-service financial advisory firm, the Company offers financial planning and investment management.

Advisors' Opinion:

• [By Investment Biker]

  Investment Summary: This article is on Western Alliance Bancorporation (WAL), a growth-oriented commercial lender in the Southwest. The banks looks set to improve profitability supported by economic recovery in Last Vegas, industry-leading revenue performance and operating leverage supported by expense control. The credit profile of the bank looks excellent with limited exposure to residential mortgage and well poised to grow its loan portfolio by 20% annually over the next 3 years. It is also well set on a path to credit recovery with improving fundamentals that justifies premium valuation going forward.