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| Date:
To: From: Re: |
3/6/01
Dr. David Chappell Andrew Ruck Fifth Third Bank |
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1)
Patrick Barta, "Customer
Satisfaction Falls, Notably In Retailing; Will Spending Follow?,"
Wall Street Journal, February 20, 2001.
For months, economists have suspected that declining consumer confidence has exacerbated the economic slowdown. But now, some economists say there could be another reason why consumers are growing more finicky: deteriorating service. The best news was the banking sector, which, despite having a relatively low score of 70, appears to be recovering after a steady decline in the late 1990s to a low of 68 in 1999. Back then, mergers took up much of the banks' time, and customers complained about ATMs that ran out of money and changes in transaction forms that confused them. Now, customers appear to be getting used to the new forms and ATM service has improved, and some banks have altered their incentive programs to reward tellers for promoting customer service. Bank One Corp., whose score rose to 70 from 66, has revised its policies for tellers to allow them to make more decisions on the spot, like waiving a bounced-check fee for an otherwise good customer. The notable exception was First Union Corp., whose score dropped to 66 from 68.
2)
Donna Hemans, "Fifth Third CEO 2000 Pay,Less
Options, Rose 17% To $2.8M," Dow Jones Newswires,
February 6, 2001.
Fifth
Third Bancorp President and Chief Executive George A. Schaefer Jr. received
$2.8 million, excluding options, in 2000. Schaefer's compensation
for 2000 was 17% more than his 1999 pay of $2.4 million, the filing said.
The executive's compensation included a $1.5 million bonus, compared with
1999's $1.1 million bonus. Fifth Third said Schaefer's bonus represents
150% of his 2000 base salary. The figure was based on the company's performance
goal, which was established at an 18% increase over the 1999 operating
net income or a 17% increase over the 1999 operating earnings per share.
The company met both goals.
3)
Brian
Callaghan, "Proposed
Authorized Stock Increases Last Week," Dow
Jones Newswires, February 12, 2001.
Fifth Third Bank has proposed an increase in shares of stock from 650 million to 1.3 billion. Such proposals usually require shareholder approval. Shares created in common stock increases are commonly used for splits, merger and acquisition transactions or various stock offerings. Fifth Third said it needs more authorized shares available for possible use in future acquisition and expansion opportunities that may arise, as well as for general corporate needs. Fifth Third said it will issue a substantial portion of its current authorized common shares in its merger with Old Kent Financial Corp.
4)
Robert O'Brien, "Stocks
Rise on Rate-Cut Hopes," Wall Street Journal,
February 27, 2001.
Much of the strength among blue chips apparently owed to increasing expectations the Federal Reserve will act before its next policy meeting, scheduled for March 20. One widely followed economist, Wayne Angell of Bear Stearns, fueled the speculation with a report setting the odds at 80% that the central bank would act to cut rates before that meeting. Shares of several banking and financial-service stocks responded to those forecasts. J.P. Morgan added 1.50 to 48.55, while Citigroup gained 2.10 to 50.30. Consumer lenders such as Bank One, which gained 1.16 to 35.99, as well as Providian Financial, which added 1.20 to 51.10, also reacted favorably to talk of an imminent rate cut.
5)
Stephanie Thomas, "Old
Kent Financial To Pay 12.267c Prorated Dividend,"
Dow Jones Newswires, February 19, 2001.
Old Kent Financial
Corp.'s board has conditionally authorized a provisional, prorated cash
dividend of about 12.267 cents a share, payable April 13 to shareholders
of record March 30. 
The
company said the dividend is intended to ensure that dividend payments
to its shareholders won't be hurt by the timing of its acquisition by Fifth
Third Bancorp. Fifth Third agreed to acquire Old Kent in a stock
swap valued at $4.9 billion that is expected to close in the second quarter.
Old Kent said the estimated payment of 12.267 a share is based on prorating
its regular quarterly cash dividend of 24 cents a share based on the actual
number of days between Feb. 12, the record date of its preceding dividend,
and the anticipated record date for this dividend, which is expected to
be March 30.
6)
Tara
Siegel, "Banks,
Brokers Dn; Dashed Hopes For Pre-Meeting Rate Cut,"
Dow Jones Newswire, February 28, 2001.
Federal Reserve Board Chairman Alan Greenspan dashed investors' hopes of an early interest-rate cut in his testimony to Congress earlier Wednesday, which depressed shares of banks and brokers across the board. The stock market rose earlier this week as investors speculated that the Fed would cut interest rates as early as this week, well before a scheduled meeting of Fed policy makers on March 20. Such sentiments reversed course after the Fed chairman said the U.S. central bank prefers to make interest-rate changes at its regular scheduled meetings. It is highly unlikely any reduction will come before March 20, when most Wall Streeters expect a 50-basis-point reduction. Financial services stocks have historically moved inversely to interest rates: The group's performance is seen as interlocked with rate levels since they can affect credit quality, capital markets businesses, loan originations, and net interest margins - all of which factor into companies' earnings.
7)
Marc A. Wojno, "Fifth
Third Bank Unit To Advise Four Open-End Funds," Dow
Jones Newswire, January 31, 2001.
Investment advisory firm Fifth
Third Asset Management, a unit of Fifth Third Bank, is planning to
advise four open-end funds under the Fifth Third Funds series. The
proposed funds are the Fifth Third Strategic Income Fund, the Fifth Third
Multicap Value Fund, the Fifth Third Worldwide Fund and the Fifth Third
Microcap Value Fund. The Fifth Third Strategic Income Fund will seek
a high 
level
of total return, using a combination of income and capital appreciation,
by investing at least 80% of its assets in income-producing securities.
The Fifth Third Multicap Value Fund will aim for a high level of total
return, using a combination of capital appreciation and current income,
by investing at least 65% of its total assets in equity securities such
as common stock and convertible securities. The Fifth Third Worldwide
Fund will seek a high level of total return, using a combination of capital
appreciation and income, by investing in global mutual funds. The
Fifth Third Microcap Value Fund will seek capital appreciation by investing
at least 65% of its assets in equity securities, such as common stock and
convertible bonds, of companies whose equity securities have a total market
value of between $10 million and $200 million.
8)
Donna
Hemans, "Fifth
Third's Cincinnati Financial Stake Falls Below 5%,"
Dow Jones Newswires, February 9, 2001.
Fifth Third Bank said its stake in Cincinnati Financial Corp. has fallen below 5%. In an amended Schedule 13G filed Friday with the Securities and Exchange Commission, Fifth Third said it holds a 4.89% stake, or 7,873,120 common shares. A year ago, Fifth Third held 11,074,523 shares, a 6.75% stake. Cincinnati Financial sells business and personal insurance products via its Cincinnati Insurance, Cincinnati Casualty, Cincinnati Indemnity and Cincinnati Life units. Fifth Third, Cincinnati, is the holding company for 14 banks that offer standard commercial services.
9)
Paul Beckett, "Dirty-Money
Flow in U.S. Banks Is Huge, a Senate Report Finds,"
Wall Street Journal, February 5, 2001.
A
huge amount of dirty money has flowed through the U.S. financial system
through major U.S. banks that provided accounts to high-risk offshore banks,
a new U.S. Senate staff report says. Among the major banks named
in the report are J.P.
Morgan Chase & Co., Citigroup
Inc. and Bank
of America Corp. In many cases, the banks themselves were unaware
of the nature or background of their own clients because "most U.S. banks
do not have adequate antimoney-laundering safeguards in place to screen
and monitor such banks, and this problem is longstanding, widespread and
ongoing." Many of the banks named in the report said they have already
taken steps aimed at preventing abuses of their correspondent bank accounts.
Large banks were named in the report as having provided correspondent banking
services for banks that are either shell corporations, carry high money-laundering
risks, or are based in countries with weak antimoney-laundering regimes.
Among U.S. banks that were found to have "weak due-diligence practices
and inadequate money-laundering controls" or inadequate responses to troubling
information are Citigroup's Citibank unit, J.P. Morgan Chase, Bank of America
and First Union Corp.
-- four of the six largest banks in the nation.
10)
News Roundup, "Bank
of America, J.P. Morgan Chase To Invest in Internet Bond Company,"
WSJ.com, February 27, 2001.
Bank of America Corp. and J.P. Morgan Chase & Co. said Tuesday that they will each invest $5 million in FinancialOxygen Inc., an online bond-trading company. FinancialOxygen runs BankOxygen, an online-trading service catering to financial institutions of all sizes. Bank of America and J.P. Morgan Chase, which will receive minority stakes in FinancialOxygen, plan to offer wholesale products such as federal funds, repurchase agreements and mutual funds, as well as money-market and fixed-income products through BankOxygen. Robert Oxenburgh, co-founder and chief executive of FinancialOxygen, said BankOxygen soon will expand into additional bond-market products. He also eventually expects FinancialOxygen to seek further financing. Online bond trading is still in its infancy, but growing fast. Some 80 electronic trading sites for fixed income have sprung up over the past four years.
11)
Paul Beckett, "J.P.
Morgan Chase, Others Are Criticized Over Correspondent-Banking Standards,"
Wall Street Journal, February 28, 2001.
J.P.
Morgan Chase & Co., Bank
of America Corp. and Bank of
New York Co. responded sloppily to warnings that two Caribbean correspondent-banking
clients were involved in suspicious activity during the 1990's. The
two related banks -- Swiss American Bank and Swiss American
National Bank -- received licenses in the two-island federation of Antigua
and Barbuda, and served as "repositories of illicit funds from several
illegal operations." One or both of the banks held so-called correspondent
accounts at the three U.S. banks during the 1990's, which provided them
with access to the U.S. financial system. The accounts were left open for
long periods after problems began to surface, though they now are closed.
Both Chase and Bank of America are scheduled to appear before a subcommittee
hearing.
12)
Tara Siegel, "Banks,
Other Fincl Svcs Stks Dn On Stagflation Concerns,"
Dow Jones Newswire, February 22, 2001.
Economic data recently released seem to suggest the feared economic phenomenon - essentially the unwelcome combination of inflation amid a slowing or contracting economy. The term brings up bad memories of the 1970s when lines for high-priced gasoline wrapped around corners and the jobless rate hit 9%. What does it mean for shares of financial services firms? "Lack of interest rate cuts on one side and much lower growth on the other, if not recession," said analyst Andrew Collins of ING Barings. Banks have already lost billions of dollars from corporate loans gone awry - now, the concern has seeped into the consumer-loan side. Meanwhile, stagflation also strikes fears that the Federal Reserve won't be as aggressive in its perceived campaign to cut interest rates, since that could cause inflation. Nor are they seen making a move before the next Federal Open Market Committee meeting on March 20. Financial services stocks have historically moved inversely to interest rates: The group's performance is seen as interlocked with rate levels since they can affect credit quality, capital markets businesses, loan originations, and net interest margins - all of which factor into companies' earnings.
13)
Dawn Kopecki, "Banks,
Retailers Spend Millions To Send Privacy Policies,"
Dow Jones Newswire, February 26, 2001.
Financial
service firms and retailers are spending millions of dollars and thousands
of hours to get in line with the first-ever privacy regulations passed
by Congress in late 1999. The new regulations require financial institutions,
including retailers that issue credit, to develop and notify customers
of their privacy policies each year. Businesses also have to give
customers an opportunity to opt out of having their information shared
with outside, non-financial businesses. And they have until July
1 to fully implement the new policies. "The cost of the notices is
just the tip of the iceberg. What's costing us enormously is the hours
and hours that have been spent internally," said Pamela Flaherty, a senior
vice president who oversees privacy issues for Citigroup
Inc., based in New York. As the country's largest financial services
holding firm with $901 billion in assets, Citigroup has more than 100 full-time
privacy officers throughout its network.
14)
Victoria Marcinkowski, "Bank
One Down 6% After Goldman Sachs Downgrades Stk,"
Dow Jones Newswire, February 20, 2001.
Shares of Bank
One Corp. fell 5% Tuesday after a Goldman Sachs analyst downgraded
the stock, citing the bank's greater "loan mix" towards credit cards as
opposed to commercial lending. Credit 
card
loans are riskier than commercial loans, because consumer credit cycles
last longer than commercial cycles, according to analyst Lori B. Appelbaum.
Weakening consumer confidence and rising initial jobless claims are indicators
that personal bankruptcies and, in turn, consumer loan loss rates are rising,
she wrote in a research note Tuesday. On Jan. 17, the Chicago, Ill.,
bank said it "dramatically increased" its provision for credit losses by
almost $1 billion from the year-ago quarter.
15)
Carrick Mollenkamp, "Bank
of America Plans to Expand Its Asset-Management Business,"
Wall Street Journal, February 26, 2001.
Bank
of America Corp., under pressure to increase revenue, is expected to
announce plans for a 
significant
expansion of its asset-management services, including a big increase in
the number of employees who can sell stocks, bonds and mutual funds.
The Charlotte, N.C., banking company will outline plans to hire 200 stockbrokers,
increasing to 800 the number of brokers that work in Banc of America Investment
Services Inc., according to executives at the bank. In addition, the bank
has trained and licensed 1,000 branch employees to sell mutual funds and
other annuity products, increasing the total branch employees that can
sell those products to 3,500. The moves are being taken as the bank
aims to make its asset-management business a bigger contributor to the
bank's total revenue. Still, the effort faces difficult odds, particularly
if Bank of America increases the business through limited expansions.
Even with 800 stockbrokers, Bank of America's team pales, for instance,
in comparison to industry leader Merrill
Lynch & Co., which has a total of about 15,000 stockbrokers.
16)
Pamela Tate, "Natl
City Corp To Take 1Q Chg $40M For Tax Exposure,"
Dow Jones Newswire, February 27, 2001.
National City Corp. expects to record a first-quarter charge of $40 million, or 7 cents a share, related to tax exposure on certain interest deductions that were disallowed by the Internal Revenue Service. The interest deductions were claimed for corporate-owned life insurance programs from 1990 through 1995. In late 1999, the IRS proposed adjustments to these deductions that increased the amount of taxable and interest-affected income by about $200 million. If a settlement isn't reached in negotiations, the company might record a further charge of up to $40 million later this year or next year. National City said it doesn't agree with the IRS action and plans to seek a full refund through administrative process or litigation.
