An Unpleasant Surprise Lurked in the Banking Sector This Week

Bank of America made a biiiig mistake, as it turns out. Citigroup is no longer the pariah of the big four banks, while Wells Fargo makes its dividend hike official and a group of lenders, including JPMorgan Chase, talk telecoms.

May 2, 2014 at 1:00PM

Several days ago, a certain Fool contributor who shall remain nameless opined that this would probably be a quiet week for banks. Bzzzt, wrong!

Wrong by $4 billion and change, as it turns out. This past Monday, Bank of America (NYSE:BAC) rocked the sector -- and the broader stock market -- when it dropped a bomb. The company announced that it was suspending its planned share buyback program (the $4 billion) and dividend payments, effective immediately, upon request from the Federal Reserve Board.

Bank of America, it turns out, overstated certain capital figures for 2013. Although the company says this will have no impact on its historical results or its shareholder equity, the incident raises concerns that the firm might have missed some other important, erm, details in recent times.

The klutzy lender now replaces Citigroup (NYSE:C), as the dog of the nation's big four banking stocks. Citi was one of only five (out of 30) financial institutions to have its capital allocation proposals objected to by the Fed in its Comprehensive Capital Analysis and Review handed down in March. However given recent events (not to mention a good Q1 from Citi), that bad news is starting to fade somewhat.

The spirits of both banks, in addition to those of JPMorgan Chase (NYSE:JPM), Goldman Sachs, and Deutsche Bank, could be lifted by participating in a big-ticket deal in the near future. Bloomberg reported this week that in April, Sprint (NYSE:S) approached those firms (plus Mizuho Financial Group) to discuss financing for a potential Sprint bid for rival T-Mobile US. Watch this space for developments.

In contrast to denied Citigroup and accident-prone Bank of America, Wells Fargo (NYSE:WFC) is forging ahead with its own capital distribution plans, thank you very much. The company made its planned dividend hike official this week, formally declaring a $0.35 per share common stock payout.

This is to be distributed June 1 to stockholders of record as of May 9. It's a $0.05 (or 17%) lift from the previous dividend of $0.30, and shareholders will be happy to get it. They'll also be hoping to benefit from Wells Fargo's ambitious expansion of its share buyback program, for which the bank recently authorized the purchase of an additional 350 million of its own shares. 

The company seems to be feeling rather flush these days. Perhaps as a result, yesterday it announced its goal to lend $100 billion to small businesses (those with 20 or fewer employees) between now and the end of 2018. That's proportionally more than it handed out to such entities between 2011 and 2013, and it's encouraging to see a big lender opening its wallet a little wider for that segment of the economy.

So in contrast to certain predicitions, this week did turn out to be quite eventful. Not quite in the positive way banking investors would have liked, though. Fingers crossed that the next big surprise from the sector is of the pleasant variety.

Big banking's little $20.8 trillion secret
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Eric Volkman has no position in any stocks mentioned. The Motley Fool recommends Bank of America, Goldman Sachs, and Wells Fargo, and owns shares of Bank of America, Citigroup, JPMorgan Chase, and Wells Fargo. The Motley Fool has the following options: short June 2014 $50 calls on Wells Fargo and short June 2014 $48 puts on Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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