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Sept. 5 (Bloomberg) — Merrill Lynch & Co., down 50 percent in New York trading this year, was cut to “sell” at Goldman Sachs Group Inc. on concern the firm may post more writedowns tied to credit-related investments.

Goldman added the third-biggest U.S. securities company to its “conviction sell” list, according to a report by analysts including William Tanona. The share-price estimate on the stock was lowered 23 percent to $22, compared with yesterday’s closing price of $26.21.

Merrill, battered by more than $40 billion of credit market writedowns, has sold mortgage-linked assets to reduce risk and free up capital. The company trades at 1.25 times book value, compared with 0.95 for Citigroup Inc., the only firm that’s reported larger writedowns and losses stemming from the credit market crunch, according to data compiled by Bloomberg.

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Tags: Bank, Citigroup, Credit Crisis, credit crunch, Economy, Goldman Sachs, Lehman Brothers, Merrill Lynch, mortgage crisis, Mortgages, Stock Market, U.S., Wall Street

A man walks past the Korea Development Bank headquarters in Seoul on Aug. 24, 2008. Photographer: Nasha Lee/Bloomberg News

Sept. 2 (Bloomberg) — Korea Development Bank is in talks to buy a stake in Lehman Brothers Holdings Inc., the fourth-biggest U.S. securities firm.

Chief Executive Officer Min Euoo Sung confirmed the discussions in an interview in Seoul today. “I cannot comment further,” said Min, who headed Lehman’s Seoul branch before joining the Korean bank in June. Matthew Russell, a Hong Kong- based spokesman for Lehman, declined to comment.

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Tags: Bank, China, Citigroup, Credit Crisis, credit crunch, Economy, JPMorgan, Korea, Lehman Brothers, Morgan Stanley, mortgage crisis, Mortgages, Wall Street

Sept. 2 (Bloomberg) — The best already may be over for the U.S. stock market this year.

The Standard & Poor’s 500 Index, which had the worst first half since 2002, added 0.2 percent this quarter, the only gain among the world’s 10 biggest markets in dollar terms. Shares in the benchmark index for American equity climbed to an average 25.8 times reported profits, the highest valuation in five years. The last time that happened, the S&P 500 fell 38 percent.

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Tags: Bank, Bank of America, Bloomberg, Citigroup, Economy, euro, Standard & Poor's, Stock Market, U.S., Wall Street

The Wall Street investment bank Lehman Brothers is this weekend locked in talks with a group of foreign government-backed investment funds in an effort to secure billions of dollars in new equity capital.

The Sunday Telegraph has learned that Lehman has intensified talks in recent days with Korea Development Bank, the South Korean ­government-backed lender, about a capital injection of as much as $6bn (£3.3bn). KDB has drafted in bankers from the heavyweight advisory boutique Perella Weinberg to provide counsel on the talks, which could be concluded this week.

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Tags: Abu Dhabi, Bank, Barclays, Bear Stearns, Citigroup, Credit Crisis, Economy, financial crisis, Fortis, JPMorgan, Lehman Brothers, Merrill Lynch, Morgan Stanley, U.S., UBS, Wall Street

U.S. and European banks, already burdened by losses and concerns about their financial health, face a new challenge: paying off hundreds of billions of dollars of debt coming due.

At issue are so-called floating-rate notes - securities used heavily by banks in 2006 to borrow money. A big chunk of those notes, which typically mature in two years, will come due over the next year or so, at a time when banks are struggling to raise fresh funds. That’s forcing banks to sell assets, compete heavily for deposits and issue expensive new debt.

The crunch will begin next month, when some $95 billion in floating-rate notes mature. J.P. Morgan Chase & Co. analyst Alex Roever estimates that financial institutions will have to pay off at least $787 billion in floating-rate notes and other medium-term obligations before the end of 2009. That’s about 43 percent more than they had to redeem in the previous 16 months.

The problem highlights how the pain of the credit crunch, now entering its second year, won’t end soon for banks or the broader economy. The Federal Deposit Insurance Corp. said on Tuesday that its list of “problem” banks at risk of failure had grown to 117 at the end of June, up from 90 at the end of March. FDIC Chairman Sheila Bair said her agency might have to borrow money from the Treasury Department to see it through an expected wave of bank failures. She said the borrowing could be needed to handle short-term cash-flow pressure brought on by reimbursements to depositors after bank failures.

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Tags: Bank, bank failure, Citigroup, Credit Crisis, credit crunch, debt, ECB, Economy, FDIC, Fed, Federal Reserve, Government, JPMorgan, Merrill Lynch, Morgan Stanley, mortgage crisis, Mortgages, Stock Market, Treasuy, U.S., UBS, Wachovia, Wall Street, Wall Street Journal

Aug. 22 (Bloomberg) — A failure of U.S. mortgage finance companies Fannie Mae and Freddie Mac could be a catastrophe for the global financial system, said Yu Yongding, a former adviser to China’s central bank.

“If the U.S. government allows Fannie and Freddie to fail and international investors are not compensated adequately, the consequences will be catastrophic,” Yu said in e-mailed answers to questions yesterday. “If it is not the end of the world, it is the end of the current international financial system.”

Freddie and Fannie shares touched 20-year lows yesterday on speculation that a government bailout will leave the stocks worthless. Treasury Secretary Henry Paulson won approval from the U.S. Congress last month to pump unlimited amounts of capital into the companies in an emergency.

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Tags: bailout, China, Citigroup, Credit Crisis, Economy, Fannie Mae, financial crisis, Freddie Mac, Government, Henry Paulson, mortgage crisis, Mortgages, Stock Market, Treasury, U.S., Wall Street, Wen Jiabao

NEW YORK (AP) — A Goldman Sachs analyst has recommended a short-selling strategy for shares of Citigroup Inc., noting the bank is still heavily exposed to the troubled mortgage and consumer credit markets.

In short-selling, an investor borrows shares of a company and sells them, betting the stock will go down. The investor then buys back the shares, repays the loan and — if the strategy worked — pockets the difference as a profit.

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Tags: Bank, Citigroup, Credit Crisis, Economy, Goldman Sachs, mortgage crisis, Mortgages, Stock Market, U.S., Wall Street

SINGAPORE (Reuters) - The worst of the global financial crisis is yet to come and a large U.S. bank will fail in the next few months as the world’s biggest economy hits further troubles, former IMF chief economist Kenneth Rogoff said on Tuesday.

“The U.S. is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say ‘the worst is to come’,” he told a financial conference.

“We’re not just going to see mid-sized banks go under in the next few months, we’re going to see a whopper, we’re going to see a big one, one of the big investment banks or big banks,” said Rogoff, who is an economics professor at Harvard University and was the International Monetary Fund’s chief economist from 2001 to 2004.

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Tags: Bank, bank failure, Citigroup, Economy, Fannie Mae, Fed, Federal Reserve, financial crisis, financial system, Freddie Mac, Government, IMF, Inflation, Merrill Lynch, mortgage crisis, Mortgages, U.S.

Aug. 11 (Bloomberg) — On March 11, the day the Federal Reserve attempted to shore up confidence in the credit markets with a $200 billion lending program that for the first time monetized Wall Street’s devalued collateral, somebody else decided Bear Stearns Cos. was going to collapse.

In a gambit with such low odds of success that traders question its legitimacy, someone wagered $1.7 million that Bear Stearns shares would suffer an unprecedented decline within days. Options specialists are convinced that the buyer, or buyers, made a concerted effort to drive the fifth-biggest U.S. securities firm out of business and, in the process, reap a profit of more than $270 million.

Whoever placed the bet used so-called put options that gave purchasers the right to sell 5.7 million Bear Stearns shares for $30 each and 165,000 shares for $25 apiece just nine days later, data compiled by Bloomberg show. That was less than half the $62.97 closing price in New York Stock Exchange composite trading on March 11. The buyers were confident the stock would crash.

“Even if I were the most bearish man on Earth, I can’t imagine buying puts 50 percent below the price with just over a week to expiration,” said Thomas Haugh, general partner of Chicago-based options trading firm PTI Securities & Futures LP. “It’s not even on the page of rational behavior, unless you know something.”

`Lottery Ticket’

The 57,000 puts that traded March 11 at the $30 strike price and the 1,649 that traded at $25 were collectively worth about $1.7 million, Bloomberg data show. Each put is equal to 100 shares of stock.

“That trade amounted to buying a lottery ticket,” said Michael McCarty, chief options and equity strategist at New York-based brokerage Meridian Equity Partners Inc. “Would you buy $1.7 million worth of lottery tickets just because you could? No. Neither would a hedge fund manager.”

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Tags: Bank, Bear Stearns, Citigroup, Economy, Insider Trading, JPMorgan, Merrill Lynch, mortgage crisis, Mortgages, U.S., UBS, Wall Street

The star analyst tells Fortune magazine that housing woes will force banks to keep taking writedowns.

NEW YORK (Fortune) — The credit crisis is far from over, star analyst Meredith Whitney tells Fortune magazine in its upcoming issue.

Whitney, who audaciously - and correctly - predicted last October that Citigroup (C, Fortune 500) would have to cut its dividend, tells the magazine that banks in general today are still facing much bigger credit losses than what they’ve reported so far.

The Oppenheimer & Co. analyst warned last year - and continues to warn today - that the “incestuous” relationship between the banks and the credit-rating agencies during the real estate bubble will have a long-lasting impact on banks’ ability to recover.

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Tags: bank failure, Citigroup, Credit Crisis, Dollar, Economy, Fortune Magazine, Merrill Lynch, mortgage crisis, Mortgages, Standard & Poor's