The Zacks Analyst Blog Highlights:Bank of America, Citigroup, JPMorgan Chase, Wells Fargo and FirstEnergy

Feb 25, 2013, 09:30 ET from Zacks Investment Research, Inc.

CHICAGO, Ill., Feb. 25, 2013 /PRNewswire/ -- announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include Bank of America Corporation (NYSE: BAC), Citigroup, Inc. (NYSE: C), JPMorgan Chase & Co. (NYSE: JPM), Wells Fargo & Company (NYSE: WFC) and FirstEnergy Corporation (NYSE: FE).


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Here are highlights from Friday's Analyst Blog:

Foreclosure Deal Progressing Well

The progress report released under the foreclosure settlement deal shows that 5 mortgage servicers involved in it remain on track to fulfill the commitments by Mar 1.  The servicers – Bank of America Corporation (NYSE: BAC), Citigroup, Inc. (NYSE: C), JPMorgan Chase & Co. (NYSE: JPM), Wells Fargo & Company (NYSE: WFC) and Ally Financial Inc. – provided $45.83 billion in relief during the period from Mar 1, 2012 to Dec 31, 2012. This has served an average of $82,668 to about 554,389 borrowers.

Out of the total $45.83 billion, the maximum relief of $19.51 billion was provided via short sale (vending of homes by owners for a value lesser than the mortgage amount). Here, BofA led the way with $11.8 billion of short sales, followed by JPMorgan with about $5.3 billion.

Further, the first lien modification was completed for 70,810 borrowers, receiving $7.41 billion in loan principal reduction, averaging at about $$104,626 per borrower. In addition, second lien modifications and extinguishments were given to 170,339 borrowers, representing nearly $11.60 billion in relief. Hence, a total of $19.01 billion worth of principal reductions (both first and second lien) was done by the mortgage servicers.

Moreover, as of Dec 31, 2012, another 25,114 borrowers were in active first lien trial modifications with the aggregate principal value of $3.49 billion. If the trials are successful, this would represent average potential relief of $138,802. The servicers also provided another $2.21 billion in relief via refinancing 56,400 home loans with an average unpaid principal balance of $211,834.

Hence, taking into consideration the various types of relief extended (excludes relief in process) by the banks, BofA tops the chart with $26.8 billion in aid, followed by JPMorgan with $7.7 billion, Wells Fargo with $4.2 billion, Citigroup with $2.8 billion and Ally Financial with $624 million. Though the amount totals approximately $42.1 billion, the mortgage servicers (with an exception of Ally Financial) are yet to achieve the goal as settlement provides limited credit for a certain category of assistance.

Under the terms of the foreclosure deal, the servicers receive 45 cents credit for every dollar of relief provided. The servicers will have to furnish approximately $20 billion in relief to homeowners on the verge of eviction over a period of 3 years. Also, they will be required to lower loan balances for struggling borrowers and refinance the loans for customers with homes worth less than the value of their mortgages.

Though the settlement deal came as a big relief for the banks, they are required to meet the targeted commitments or pay penalties instead. If banks fail to meet the targeted modification commitments over a period of 3 years, they could face penalties of 125%–140% of the deficit. Further, they are required to finish 75% of the commitments by the end of 2014 and the remaining over the next 12 months.

However, the foreclosure deal covers only a small proportion of underwater mortgages (nearly 11 million homes) as it is expected to provide aid to just 1 million of these. Yet, we believe that the housing sector is going to benefit from the deal as lower unemployment rates are likely to help homeowners avoid foreclosures in the near term. Also, the servicers will be benefited as it will facilitate the improvement of balance sheet.

FirstEnergy's 2013 Upgrade Plan

FirstEnergy Corporation's (NYSE: FE) business wing Jersey Central Power & Light announced its plans to invest $200.0 million in 2013 for the development and modernization of existing infrastructures in New Jersey as well as to fund the ongoing restoration works in the areas impacted by Hurricane Sandy.

The company had spent an equal amount in 2012 for the same purpose and expects these infrastructure initiatives to enhance daily service reliability for customers along with making their systems suitable for future load growth.

The program's objectives include progress of key projects lined up in 2013 like the completion of a new substation and existing vegetation management initiatives. Other activities involved are construction of new circuits, supervising and altering utility poles and replacing underground cables.

The investment goals include a series of crucial programs like modernization of 90 distribution circuits by providing animal guards, spacer cable and replacing new wires to aid in minimizing outages in Jersey territories. For this, the company will shell out $2.5 million and expects to conclude building a new circuit in the Riverdale-Butler province in Morris County which will help expand capacity to absorb more loads and safeguard against power supply loss.

In addition to this FirstEnergy is looking to complete and activate the Tewksbury substation in Hunterdon County which will cost about $4.0 million and will offer additional circuits to boost indigenous distribution systems and reduce the duration of outages. Furthermore, power poles scrutiny is expected to begin in spring with the company contemplating to add new poles and conductors in Morris County. The company will also be involved in changing the underground cables in Manchester Township, Ocean County.

Other ventures include building a circuit connecting the Larabee and Howell substations to support load and installing systems to examine voltage levels. Further, FirstEnergy is expected to carry on works like pruning trees which will help alleviate damage to distribution facilities arising from falling tree limbs.

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