UnionBanCal Says It Beat Estimates

L.A. Times Archives

Oct. 8, 2002 12 AM PT

From a Times Staff Writer

Shares of UnionBanCal Corp. surged Monday after the San Francisco-based company said it expected third-quarter profit to come in above Wall Street’s estimates.

The forecast from the parent company of Union Bank of California came as welcome news in the banking sector, which was hit last week by warnings from a string of national and regional banks. Some institutions, struggling amid the weak U.S. economy, said they were increasing reserves for bad loans, and a major index of bank stocks lost almost 10% for the week.

UnionBanCal’s stock also had been falling, but it reversed that slide Monday, climbing $1.35, or 3.8%, to $37. The gain came even as the broad market tumbled and the Bloomberg index of bank stocks fell again, dropping 4.1%.

Analysts said the company didn’t specify by how much it expects to beat Wall Street’s forecast for its third-quarter operating earnings, which Thomson First Call’s consensus estimate now puts at 85 cents a share.

However, it said the improving profit picture was due to several factors, including lower provisions for credit losses and lower nonperforming assets compared with the second quarter of this year.

The company expects to report results Oct. 16.

Gary Townsend, a senior analyst with Friedman, Billings, Ramsey & Co. in Arlington, Va., said UnionBanCal’s credit condition has been improving for several quarters, so the upbeat profit outlook wasn’t wholly unexpected.

Still, he said, “I was very pleased to see this. It was the only [winning stock] on my screen today.”

Documents Indicate

Conflict at CSFB

Further evidence emerged that Credit Suisse First Boston may have used coverage of companies by its research department to win and retain lucrative investment banking business.

According to documents obtained in the course of a regulatory probe of CSFB, the bank wooed potential clients by contrasting its top rating for a company it had brought public against competitors’ less enthusiastic ratings.

In a July 1999 presentation, the bank headlined a confidential proposal to Virata Corp., a company seeking to make an initial public offering of shares, “CSFB Stands by Its Clients.”

The presentation included charts showing that CSFB retained its top-rated “strong buy” after a company released results below analysts’ expectations, in contrast with other underwriters of IPOs that cut their recommendations after bad news.

The documents also show that a CSFB employee asked Frank Quattrone, a top West Coast banker for the firm, to return a client, Research In Motion, to what is described as “most favored nation” status after the company paid $1.8 billion in underwriting fees.

Massachusetts Secretary of State William Galvin told several newspapers that the documents provide a “smoking gun” against CSFB and Quattrone.

Galvin, who is leading a probe of CSFB on behalf of state securities regulators, could not be immediately reached for comment.

In September, Galvin referred the preliminary results of his investigation to New York Atty. Gen. Eliot Spitzer, who is helping to head a coalition of about 40 state securities regulators investigating Wall Street research practices.

Wall Street has been under scrutiny as regulators investigate whether brokerages misled investors as they privately disparaged stocks while publicly touting the companies to win their banking business.

“We welcome the participation by Mr. Galvin in the new coalition of state and federal regulators who are trying to move these issues forward toward constructive resolution to restore investor confidence,” a CSFB spokeswoman said.

Reuters

Time Inc. Is Folding

Mutual Funds Magazine

Mutual Funds, a monthly personal finance magazine published by Time Inc., is closing down after its November issue amid a deep slump in advertising spending, the company said.

Time Inc., part of AOL Time Warner, said the magazine has suffered as financial companies, especially mutual fund firms, scaled back their advertising spending.

Mutual fund companies, reeling amid a severe stock market downturn that has eroded their profits, increasingly have sold their funds through intermediaries, making advertising in publications less important.

Time acquired the magazine, which has a circulation of about 825,000, in 1998 from the Institute for Econometric Research, a privately held financial publishing company.

Reuters

Gramm Lines Up Job

at UBS Warburg

Sen. Phil Gramm (R-Texas), an advocate of free markets who helped shape the most sweeping overhaul of U.S. banking laws since the Great Depression, will join UBS Warburg as vice chairman when his term ends.

Gramm, 60, will advise clients on corporate finance issues and strategy, the firm said. Gramm will retire Jan. 3 after serving 24 years in Congress, the last 18 in the Senate. Gramm said he would be reporting to UBS Chairman John P. Costas.

“I think this is something that I’m going to be good at,” Gramm said in Washington. “I’ll be disappointed if I’m not.”

Bloomberg News

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State’s Banks Lure Investors

Shares of many California banks have fared better than the average bank stock nationwide this year. Stocks of the state’s smaller banks have in part benefited from speculation that they are takeover candidates. A sampling of California-based banks:

Ticker Mon. Mon. YTD % Bank symbol close change change

VIB Bancorp VIBC $14.95 +$0.02 +62.8%

Sierra Bancorp BSRR 10.40 -0.30 +48.6

Hawthorne Finl. HTHR 26.05 -0.02 +35.7

Broadway Finl. BYFC 15.87 -0.10 +26.5

East West Bankcorp EWBC 29.49 -1.78 +14.5

Cathay Bancorp CATY 36.03 -3.12 +12.5

Pacific Capital SABB 23.29 -1.49 +11.7

Hanmi Financial HAFC 14.30 -0.70 +7.5

Wells Fargo WFC 43.53 -1.33 +0.1

UnionBanCal UB 37.00 +1.35 -2.6

City National CYN 40.40 -1.99 -13.8