8/26T8:28 News

Regulators step up bank actions - WSJ
WSJ reports federal regulators have increased the number of struggling banks they have effectively put on probation, forcing them to fix their problems and try to avoid potentially costly failures. The Federal Reserve and the Office of the Comptroller of the Currency, two of the nation's primary bank regulators, have issued more of these so-called memorandums of understanding so far this year than they did for all of 2007, according to data obtained from regulatory agencies under Freedom of Information Act requests. These secret agreements can force banks to take steps including raising capital, cutting back on risky loans and suspending dividend payments. The depth of problems in the banking sector will become clearer Tuesday, when the FDIC updates its list of "problem" institutions. The FDIC had 90 banks on its list March 31. There have been five bank failures since July 11, and many other banks are considered at risk by regulators. Government officials have been brokering the memorandums with institutions large and small, from National City (NCC), to First Private Bank & Trust, a unit of Boston Private Financial Holdings (BPFH). "The increase in [memorandums] is not surprising given the more challenging market conditions faced by many banking organizations," said Roger Cole, the Fed's director of banking supervision and regulation. They "are useful in specifying weaknesses in risk management and other areas that need to be addressed by bank management."

BKUNA Bankunited Fin needs $400 million to satisfy regulators - Bloomberg.com (1.59 )
Bloomberg.com reports BankUnited Financial, Florida's largest bank, may lose its "well-capitalized'' status under federal rules for financial strength unless it attracts at least $400 mln of new capital. The Office of Thrift Supervision will downgrade BankUnited to "adequately capitalized'' if the company fails to raise funds, according to a regulatory filing today. More restrictions could be placed on the bank, affecting its financial position and operations, the Coral Gables, Florida-based bank said. BankUnited said in June it was seeking $400 mln to boost capital and offset losses on its $10 bln of home loans. The company has posted more than $200 mln in losses in the last three quarters because of record foreclosures.

Temasek says sees value in U.S. and UK banks - Reuters.com
Reuters.com reports Singapore sovereign fund Temasek, which spent billions of dollars on shares in Merrill Lynch, sees value in banking stocks in the United States and Britain, a senior executive said on Tuesday. "The financial service industry is one we believe in," said Manish Kejriwal, Temasek's senior managing director for investment, International and India, told journalists. "It's a proxy to the economic growth." "We recently concentrated on U.S. and UK primarily because we see value."

TALKX Floor Talk: Financials in general are seeing a moderate rebound, GSEs flying; Key banking industry report due out later today
Financials are rebounding moderately this morning following yesterday's broad sell-off. Focus continues to be centered on the GSEs, which stand out as the top performers in the market this morning (FNM +17.7%, FRE +24.6%), adding on to yesterday's gains. Both cos released their July 2008 summaries this morning, but these reports don't seem to be major drivers of the stock action. DJ reported that a Goldman Sachs note said anxiety over a possible govt bailout of FNM and FRE is unwarranted, as a GSE bailout would be entirely manageable. There has also been increased interest in which institutions have exposure to the GSEs preferred stock after JPM disclosed yesterday that their holdings (~$1.2 bln) of such preferred stocks had declined in value by approx an aggregate $600 mln in the Q3 to date. A Keefe Bruyette note that was out before the open yesterday has received some attention, as it highlighted the GSE preferred exposure since investors are increasingly concerned that the preferred stockholders at the GSEs could suffer partial or complete elimination of their interests. They believe large-cap banks have limited exposure to GSE preferred stock, however select regional banks have significant exposure. They believe regional banks with the most exposure to GSE preferreds relative to tangible capital are GBTS, MBHI, WABC, FFKT and SOV. This morning Lehman noted that with respect to preferred GSE stock, JPM ($1.2 bln), FITB ($55 mln), MTB ($162 mln), and USB ($79 mln) recently highlighted their holdings... There was also some mixed housing data out this morning, with home sales remaining depressed but inventories declining. OFHEO also released their quarterly housing price index, showing the rate of house price declines slowed in Q2... A key item of interest later today will be the FDIC's quarterly banking report, due out this afternoon (expected at 3:00 E.T.). Although the report won't comment on specific institutions, it will give an updated read on the state of the banking industry. Traders are likely to be focused on the updated bank "Problem List." Last qtr, the number of institutions on the FDIC's "Problem List" increased to 90 from 76, representing the sixth consecutive quarter that the number of problem institutions has increased, from a historic low of 47 institutions at the end of 3Q06. That level represented the largest number of institutions on the list since third quarter 2004, when there were 95 "problem" institutions... Current performance within the financial sector stands as follows: XLF (Financial Sector SPDR) +0.8%, BKX (KBW Bank Index) +0.8%; AIG +2.1%, LEH +1.5%, C +1.5%, JPM +1.2%, BAC +1.1%, WFC +1.1%, GS +0.6%, MS +0.5%, MER +0.4%