Spain will demand banks set aside another 35 billion euros ($45 billion) against loans to the ailing building sector, financial sources said, raising the possibility more public cash will be needed to rescue the country’s lenders.
The government and banks are belatedly recognizing a multi-billion funding gap in the financial system linked to a 2008 property crash that has heightened fears the country may need an international bailout.
Lenders, already trying to write down 54 billion euros of losses on bad property investments, are unlikely to be able to find the extra funds without public help. Some also doubt whether the additional provisioning will be enough.
Moody’s Investors Service will this month start cutting the credit ratings of more than 100 banks, a move that risks pushing up their funding costs and forcing them to curb lending in a threat to economic growth.
BNP Paribas SA (BNP), France’s biggest lender, Deutsche Bank AG, Germany’s largest, and New York-based Morgan Stanley are among firms that face having their short- and long-term debt downgraded to their lowest-ever levels by Moody’s, the ratings company said in February.
The cuts, which would follow downgrades by Standard & Poor’s and Fitch Ratings last year, could erode profits, trigger margin calls and leave some firms unable to borrow from money- market funds that have strict rules on who they can lend to. Without access to funding from private sources, banks have had to sell assets and reduce lending.
Walt Disney [DIS 44.30 0.48 (+1.1%) ] – Disney reported fiscal second-quarter profits of $0.58 per share, three cents above estimates, with revenues also above consensus. Chairman/CEO Bob Iger tells CNBC there will be a sequel to the smash hit movie “The Avengers.”
International Game Technology[IGT 14.94 -0.18 (-1.19%) ] – The company issued a statement of support for CEO Patti Hart, who’s been embroiled in controversy in her role as a member of Yahoo’s[YHOO 15.36 0.01 (+0.07%) ] board of directors. IGT says its own board has reviewed Hart’s academic credentials and found no inconsistencies. Yahoo is currently in the process of doing a similar review involving its CEO Scott Thompson.
Macy’s [M 39.51 -0.78 (-1.94%) ] – The retailer reported first-quarter profit of $0.43 per share, three cents above estimates. CEO Terry Lundgren credits continuing sales and earnings momentum, as well as strategies such as localization of merchandise offerings.
Dean Foods[DF 12.72 0.40 (+3.25%) ] – The food and beverage maker reported quarterly profit of $0.31 per share, excluding certain items, above estimates of $0.21 cents. The company says it saw growth across all its segments, supported by tight control of expenses.
SodaStream[SODA 29.19 -0.50 (-1.68%) ] – The producer of home soda-making systems earned $0.55 per share for its first quarter, excluding certain items. That was seven cents above estimates, with revenue also trouncing consensus. It’s also raising its 2012 earnings guidance.
Green Mountain Coffee Roasters[GMCR 26.38 2.08 (+8.56%) ] – The company has stripped chairman and founder Robert Stiller of his title, after finding that one of Stiller’s stock sales violated company policy on internal trading. Lead director William Davis has also been removed from that role in connection with his own stock sales.
Avon Products[AVP 19.77 -0.30 (-1.49%) ] – Fitch has cut Avon’s debt ratings, while issuing a “stable” outlook. Fitch says the downgrade reflects the cosmetics company’s negative free cash flow from operations during the past two years and the first quarter of this year.
GlaxoSmithKline[GSK 46.02 -0.55 (-1.18%) ] – The drugmaker is taking its $2.6 billion takeover bid for Human Genome Sciences[HGSI 14.62 0.23 (+1.6%) ] directly to shareholders through a $13 per share tender offer. Human Genome has already said Glaxo’s bid is too low.
Toyota Motor[TM 78.17 -0.52 (-0.66%) ] – The automaker says it expects to triple its operating profits this year. That would put those profits at more than $12.5 billion, the highest since the financial crisis in 2008.
Ingersoll-Rand[IR 42.27 -0.40 (-0.94%) ] – Nelson Peltz’s Trian Fund Management is reporting a more than 7 percent stake in the industrial conglomerate, saying the shares are undervalued.
Demand Media[DMD 7.93 -0.32 (-3.88%) ] – The operator of websites such as eHow and LiveStrong reported fiscal first-quarter profit of $0.07 per share, two cents above estimates. Revenue beat consensus and the company also raised its 2012 outlook on improving ad revenue and customer traffic.
EOG Resources[EOG 103.99 -0.78 (-0.74%) ] – The natural gas and oil producer earned $1.17 per share for the first quarter, one cent above estimates, as it benefited from increased output and higher prices.
American International Group[AIG 31.70 -0.14 (-0.44%) ] – Goldman Sachs has upgraded the stock to “buy” from “neutral,” saying this year will be full of catalysts for the insurance company that are made even more compelling by the stock’s low valuation.
Dow Chemical[DOW 32.11 -0.18 (-0.56%) ] – Morgan Stanley has upgraded the chemical maker’s stock to “overweight” from “equal weight.”
The selloff on the Athens Stock Exchange continued, down another 3.62% on top of yesterday’s loss of 6.67%. But unlike yesterday, the major European exchanges followed suit. France lost 2.78%, the DAX 1.90%, Milan 2.37% and the FTSE 100, which was closed yesterday, gave up 1.78%. The S&P 500 seemed to follow the European example, plunging at the open and hitting its intraday low in the late morning, down 1.17%. But the trend reversed in the afternoon, and the index retraced much of the decline to close with less scary 0.43% loss. Year-to-date the index is up 8.44%, which is 3.90% off its interim closing high set on April 2nd.
From an intermediate perspective, the S&P 500 is 101.6% above the March 2009 closing low and 12.9% below the nominal all-time high of October 2007.