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Friday, July 21, 2006

Financial Pulse

By William Trent, CFA of StockMarket Beat

Summary: Inflation continues to be a worry, with the PPI data fairly strong and seemingly on the rise. That means lenders are getting paid back with cheaper currency. Earnings are coming in strong, however - particularly for the brokers and asset managers.

Watch List news:
Bancolombia SA (CIB) agreed to sell its majority stake in Almacenar S.A. for 29 billion pesos. Translating to approximately $11 million, the transaction is fairly small for a company with $4.14 billion in market capitalization.

SEI Investments Co. (SEIC), which provides investment services to financial institutions, said second-quarter profit rose 31 percent on higher revenue, a lower tax rate, and lower expenses to account for the value of employee stock options. The company posted net income for the second quarter ended June 30 of $57.9 million, or 57 cents per share, versus profit of $44.2 million, or 43 cents per share, in the year-ago quarter. Revenue rose 50 percent to $285 million from $190.1 million. Analysts polled by Thomson Financial forecast earnings of 55 cents per share on $284.1 million revenue.

First Regional sets 3-for-1 stock split

Other news:
Merrill Lynch (MER) said second-quarter earnings were $1.6 billion, or $1.63 a share, compared with $1.14 billion, or $1.14 a share, in the same quarter last year. Analysts polled by Reuters Estimates on average expected earnings of $1.53 before exceptional items.

Citigroup (C) earned $5.27 billion, or $1.05 a share, compared to $5.07 billion, or 97 cents a share, a year ago. Analysts had expected the company to earn $1.06. “Lower bankruptcy filings and a continued favorable credit environment led to a $193 million decline in net credit losses and a $160 million pre-tax loan loss reserve release,” the bank said. Comment: Releasing reserves is sometimes considered aggressive accounting. Regardless of how it is considered, approximately $0.01 of the current quarter EPS was the result of this accounting adjustment.

Wells Fargo profit up 9 percent - which was below expectations.

MGIC Investment Corp. reported that second-quarter net income fell 14% as the mortgage-insurance specialist’s net premiums declined in the face of a real estate slowdown.

AmSouth Bancorp said second-quarter net income rose slightly from the year-ago period and indicated it is making “good progress” in closing its merger with Regions Financial Corp. in the fourth quarter.

State Street said its net earnings rose 3% in the second quarter, topping analysts estimates, and said it expects full-year earnings to come in at the high-end of forecasts.

Discount stockbroker Charles Schwab Corp. said quarterly earnings rose 35 percent as net new assets nearly doubled from a year earlier.

Online brokerage TD Ameritrade said its third-quarter profit soared 67 percent on higher fee-based revenue and its acquisition of TD Waterhouse.

National City Corp., a large Midwest U.S. bank, said second-quarter profit fell 24 percent because of hedging losses from mortgages. Still, this was better than expectations.

KeyCorp, a large U.S. Midwest bank, said second-quarter profit rose 6 percent, topping analyst forecasts, helped by growth in fee income and commercial lending.

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