Stifel downgrades Wells Fargo shares to 'hold'

Analysts with financial services firm Stifel Nicolaus said Monday that they are downgrading shares of Wells Fargo to "hold" as the Federal Reserve's moves to hold down interest rates will start to catch up with the bank.

It ends a long run for the bank, considered one of the strongest U.S. banks in terms of stock performance, as a "buy" for the firm. I wasn't able to determine when Stifel made it a buy, but it's been there since I came to the Observer last year.

Stifel said that while mortgage refinancing will keep the bank strong for the next few quarters, it will likely taper off. At that point, the shrinking net interest margin will affect Wells' earnings more.

Wells shares closed Monday at $35.33, down 2 percent, though it has gained more than 4 percent in the past two weeks as bank stocks have rallied. Stifel said it would recommend buying Wells again in the $32 to $33 range.

N.C. banks shrinking, fixing balance sheets

North Carolina's banks showed smaller but stronger balance sheets in the second quarter, according to a profile released by the Federal Deposit Insurance Corp. on Monday.

Total assets at N.C. banks fell 1 percent, to $1.686 trillion, from the same time period a year ago. The number of banks fell to 93, from 99 a year ago. Total loans as a percentage of assets fell, too.

But the median percentage of past-due and nonaccrual loans as a percentage of a bank's total loan portfolio fell as well, hitting 4.16 percent from 5.42 percent a year ago.

Capital levels increased, as did return on assets.

Big firms jumping in to foreclosure-to-rental market

Welcome to the morning roundup. Here's a look at what's news in banking and finance.

Investor gets foreclosed home debt deal. A major investment company buying up foreclosed homes to ultimately rent them out has received a $65 million loan deal from Citigroup, the first major financing deal for the increasingly popular business, the Wall Street Journal reports. It could pave the way for securitization of such home rental payments.

Four years after Merrill. Exactly four years and one day ago, Bank of America announced it would buy Merrill Lynch for $50 billion and Lehman went under. Taking stock of the financial world today, the system is no longer on the brink of catastrophe, but things still aren't great, CBS News says.

QE3 impact lessened. The Federal Reserve's new quantitative easing program -- focused on buying mortgage backed securities -- will be slowed by the fact that banks either can't or won't process mortgage applications any faster, the Financial Times says. That keeps mortgage rates higher.

Citizens South settles shareholder suit over merger

Citizens South reported Friday that it has settled the shareholder suit brought after it announced its acquisition by Park Sterling in May.

The settlement does not report any money changing hands, but adds numerous disclosures to the narrative of the merger shareholders will use to decide whether to approve the merger, including internal earnings projections should the bank have remained stand-alone.

The new disclosures, reported in a securities filing, are hard to follow because they are to be inserted in the narrative in the securities document outlining the merger.

At the time, Citizens South CEO Kim Price had been negotiating with two other banks about a merger. One new disclosure says that Price had asked one of them whether he would be able to join the board of the combined bank, and told no. Citizens South had previously disclosed that the deal did not work out because it would not happen soon enough.

A table inserted in the merger prospectus also includes a financial analysis that predicted a significant increase in earnings, equity and stock price in the three coming years without a merger. For example, Citizens South had estimated tangible book value per share to increase nearly 50 cents between 2012 and 2013. In a presentation given the day of the merger announcement, the two banks estimated the deal to increase tangible book value per share in four years.

The lawsuit was filed shortly after the merger announcement and granted class action status in early August. The two parties reached an agreement this Wednesday, the securities filing says. It still must be approved by the court.

The plaintiff in the suit is expected to file a petition with the court to be awarded attorney's fees, but the bank said it has a right to fight it.

A shareholder vote to approve the merger has not yet been set.

Carolinas unbanked at higher rate than U.S.

A higher percentage of people in North and South Carolina are without bank accounts or regularly use non-bank financial services than the country as a whole, a report from the Federal Deposit Insurance Corp. says.

About 360,000 households in North Carolina, or 9.3 percent, have no bank account, and another 840,000, or 21.7 percent are considered "underbanked," meaning the household has a checking or a savings account at a bank but also uses non-bank check cashing, remittance, money order or payday loan services.

That's an increase from 2009, when 8.1 percent were without bank accounts and 20.3 percent used so-called "alternative financial services," according to the FDIC.

In South Carolina, an equal percentage are unbanked, and 20.6 percent used the non-bank services. That was actually a decrease from 2009, when 10.3 percent had no bank account.

Nationwide, the majority of unbanked households reported not feeling like they had enough money for a bank account or did not want one. The number of people forgoing the traditional banking system increased slightly, perhaps as people have lost trust in the system.

The FDIC, for its part, encouraged banks to reach out and create services tailored to the unbanked and underbanked.

	Unbanked	Underbanked	Fully banked
U.S.	8.2	20.1	68.8
N.C.	9.3	21.7	66.5
S.C.	9.3	20.6	68.2

Bessant to keynote at Sibos conference in Japan

Bank of America technology and operations executive Cathy Bessant will be a keynote speaker at the high-profile Sibos conference next month, held this year in Osaka, Japan.

Sibos, to be held from Oct. 29 to Nov. 1, is a global financial services conference expected to draw more than 7,000 people. Bessant will speak to the technology forum. The conference also includes compliance, corporate and standards forums.

The conference was first held in 1978 in Brussels.

Krawcheck warns of big bank complexity

Welcome to the morning roundup. Here's a look at what's news in banking and finance.

Krawcheck warns of bank complexity. Former Bank of America Merrill Lynch executive Sally Krawcheck warned bankers Thursday of the complexity of Wall Street banks during a conference in Manhattan, The New York Times reports. While she did not push a particular method of breaking up big banks, she said she supported the debate over reinstating Glass-Stegall and said executive compensation should be changed.

Wells and Discover. People are still talking about the rumors that Wells Fargo could pursue acquiring Discover Financial, but a Discover executive suggested the company wasn't taking it too seriously, the Wall Street Journal says.

Fed's new action. The Federal Reserve's new course of action will involve buying mortgage backed securities until the market improves, The New York Times reports, a departure from the smaller scale, time limited approach it had followed. Investors liked the news, powering the Dow, but many economists warned that the impact would be small, and could drive inflation.

JPMorgan shares make up Whale loss. JPMorgan Chase shares have now recovered from the steep decline that followed the announcement that it had lost billions in oversize trades, Bloomberg reports. The bank's stock jumped nearly 4 percent on Thursday, reaching $41.40, the first time it had exceeded the $40.74 it posted on May 10.