(Reworks lede, adds stock prices.)
DOW JONES NEWSWIRES
Shares of financial institutions rose sharply as investors bet once again that
big write-downs, this time by UBS AG (UBS), and recapitalization efforts could
signal a bottom in the credit crunch for banks.
But previous rallies have quickly short-circuited, as troubled credit markets
brought caution back to the fore.
UBS shares were up 11% to $32.07 in recent New York trading. The company
reported another $19 billion in write-downs, said it will seeking shareholder
approval to raise another CHF15 billion ($14.9 billion) in fresh capital and
noted that Chairman Marcel Ospel won't stand for re-election.
Lehman Brothers Holdings Inc. (LEH), facing persistent if vague rumors of
financial trouble, was trading up 11% to $41.71 after disclosing plans to sell $
4 billion in preferred stock. Meredith Whitney of Oppenheimer saw the Lehman
announcement as the first in a long line of similar moves to come for financial
institutions this year.
Morgan Stanley analysts saw signs of optimism for the industry as a whole,
saying, "While cautious near term, we are optimistic further out as the cycle
turns and we see numerous opportunities for rebound and growth, including the
return of credit distribution, albeit in a very different form."
Deutsche Bank analysts, however, forecasted another $50 billion in first-
quarter losses among big banks and brokers.
One strategist said early Tuesday the benchmark high-grade derivatives index,
the Markit CDX IG10, was "tight" as the market appears to be taking the larger-
than-expected write-downs at UBS and Deutsche Bank AG (DB) and the capital-
raising schemes in stride. Deutsche Bank gained 3% after forecasting first-
quarter write-downs of about EUR2.5 billion ($4 billion).
"Financials are clearly still prone to further losses, which could weigh on
financial stocks, but we believe the market is pricing these in to a large
extent," said analysts at Barclays Capital.
U.S. financial giants also rallied, with Citigroup Inc. (C) and Merrill Lynch
& Co. (MER) up 9% and 8%, respectively. Goldman Sachs sees write-downs of $17.2
billion for Citigroup and $5.1 billion at Merrill and expects the firms to raise
capital from equity offerings, asset sales and/or dividend cuts.
- By John Flowers, Dow Jones Newswires; 201-938-5964; john.flowers@
dowjones.com
(END) Dow Jones Newswires
04-01-08 1124ET
Copyright (c) 2008 Dow Jones & Company, Inc.
