Right now, the early bird is getting killed. On the heels of the Federal Deposit Insurance Corp.'s seizure on Friday of mortgage lender IndyMac Bancorp, regional banks
are taking a serious beating Monday, their stock prices falling precipitously as
stock investors worry that other lenders will follow suit. Among the biggest
decliners as of Monday afternoon were Washington Mutual Inc., down 31%, and
National City Bancorp, down 25%.
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Unfortunately, those two banks were also the beneficiaries in April of
large-scale capital infusions by private equity firms TPG Capital, in the
case of WaMu, and Corsair Capital, in the case of Nat City.
The most recent plunge leaves those private equity firms deep underwater on
investments. In fact, based on the $8.75 share price at which TPG invested in WaMu, its
$2 billion investment is 60% in the red, as WaMu's stock traded at $3.47
Monday afternoon.
Things are just as bad for Corsair, which bought its stake in National City
for $5 a share in April. So bad was the Nat City situation that the bank had to halt
trading in its stock Monday morning to issue a statement reassuring the
market that, "National City is experiencing no unusual depositor or creditor
activity." Shares kept falling when trading resumed, however, down as low as
$2.99 a share at one point, putting Corsair and its investing partners about
59% under water.
While industry observers concede that private equity seems to have the most
dry powder and willingness to invest in the sector, potentially providing a
capital boost to an industry in desperate need of it, Monday's stock plunge
has to be seen as anything but affirmation of private equity's belief that
the sector presents value, at least in the short term.
-Vipal Monga
Troubled Wall Street
Share prices at 3:00 pm July 14, 2008 |
| Name |
Open |
Last price |
Change |
Mkt cap |
IndyMac Bancorp
|
0.17 |
0.15 |
-.13 |
14.68M |
Washington Mutual Inc.
|
5.13 |
3.15 |
-1.6 |
3.38B |
National City Bancorp
|
4.50 |
3.63 |
-.79 |
2.75B |
Bank of America Corp.
|
22.80 |
20.50 |
-1.17 |
91.24B |
| Morgan Stanley |
32.22 |
32.24 |
-1.27 |
35.90B |
| Citigroup Inc. |
16.76 |
15.34 |
-0.82 |
80.53B |
| Fannie Mae |
12.87 |
10.75 |
+.61
|
10.49B |
| Freddie Mac |
8.94 |
7.68 |
-.06 |
4.97B |
| Wachovia Corp. |
11.92 |
10.49 |
-1.05 |
22.36B |
Source: The Deal |
Comments
Now that IndyMac is the first of many banks to fail, I think we're going to see a lot more banks, not only close for the weekend, but close for good and go bankrupt. Rumors talk about 90+ banks, I think that's a little exaggerated, but very well possible. I would guesstimate around 30+ banks will close shop.
I'm an investor in the stock market and have started to build a position in Bank of America. One of the few 500 lb. gorillas left in the room. Every dip, I pick up more shares. I don't think there going anywhere, but you never know. Investments are all risky.
I never thought I would see this happen here in the USA, but here we are....let's all cross our fingers.
petes2cents.com