Zacks Analyst Blog Highlights: JPMorgan Chase, U.S. Bancorp, BB&T, Best Buy Company and Wal-Mart Stores

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Feb 23, 2011, 09:30 ET

CHICAGO, Feb. 23, 2011 /PRNewswire/ -- Zacks.com Analyst Blog features JPMorgan Chase & Co. (NYSE: JPM), U.S. Bancorp (NYSE: USB), BB&T Corporation (NYSE: BBT), Best Buy Company Inc. (NYSE: BBY) and Wal-Mart Stores Inc. (NYSE: WMT).

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Here are highlights from Tuesday's Analyst Blog:

Bank Failures: 22 Already in 2011

The FDIC insures deposits in 7,760 banks and savings associations in the country as well as promotes the safety and soundness of these institutions. When a bank collapses, the FDIC reimburses deposits of up to $250,000 per account.

Though the FDIC has managed to shore up its deposit insurance fund during the last few quarters, the outbreak of bank failures has tested its limits. As of September 30, 2010, the fund remained in the red with a deficit of $8 billion despite adding $7.2 billion during the quarter.

The failure of Habersham Bank is expected to be dearer by about $90.3 million for FDIC, while Citizens Bank of Effingham will cost about $59.4 million. The other two banks, Charter Oak Bank and San Luis Trust Bank, FSB will cost the FDIC about $21.8 million and $96.1 million, respectively.

Orangeburg, South Carolina-based SCBT National Association has agreed to assume the assets and deposits of Habersham Bank. The FDIC and SCBT National Association have agreed to share losses on $270.7 million of Habersham Bank's assets.

Albany, Georgia-based Heritage Bank of the South has agreed to assume the assets and deposits of Citizens Bank of Effingham. The FDIC and Heritage Bank of the South have agreed to share losses on $158.1 million of Citizens Bank of Effingham's assets.

Novato, California-based Bank of Marin has agreed to assume all of the deposits of Charter Oak Bank. The FDIC will retain $28.5 million of the assets for future disposal.

Westlake Village, California-based First California Bank has agreed to assume the assets and deposits of San Luis Trust Bank, FSB. The FDIC and First California Bank have agreed to share losses on $241.7 million assets of San Luis Trust Bank, FSB.

On a separate note, Denver, Colorado-based United Western Bank, which was closed on January 21, filed a suit against the FDIC and the federal Office of Thrift Supervision. Under the suit, United Western Bank claimed that the decision to close the bank was untimely.

United Western Bank was just about to raise $200 million in capital, which would have spared the bank from being padlocked. In fact, allowing the bank to raise capital would have saved an expected $312.8 million of deposit insurance fund.

In the third quarter of 2010, the number of banks on FDIC's list of problem institutions grew to 860 from 829 in the previous quarter and 552 in the year-ago quarter. This is the highest since the savings and loan crisis in the early 1990s.

Increasing loan losses on commercial real estate are expected to result in hundreds of bank failures in the forthcoming years. Going by the current rate of bank insolvencies, the FDIC is likely to feel a $52 billion pinch over the next three years.

The failure of Washington Mutual in 2008 was the largest in the U.S. banking history. It was acquired by JPMorgan Chase & Co. (NYSE: JPM). The other major acquirers of failed institutions since 2008 include U.S. Bancorp (NYSE: USB) and BB&T Corporation (NYSE: BBT).

Best Buy's Strategic Measures

Best Buy Company Inc. (NYSE: BBY), the leading specialty retailer of consumer electronic products, recently announced a string of strategic measures to boost its financial performance across its international and local divisions.

The company intends to increase its investment in sections of business generating profits, and will close down and restructure certain sections that no longer contribute significantly to its growth.

Followed by an extensive evaluation, Best Buy, which faces stiff competition from Wal-Mart Stores Inc. (NYSE: WMT), aims to open 150 Best Buy Mobile stand-alone-stores in the U.S. and 40 to 50 Five Star stores in China by the end of fiscal 2012, bringing the total to 325 stores in the U.S. and 210 in China.

Moreover, the company plans to open 6 to 8 large-format stores in the U.S. and a total of 18 stores in the United Kingdom, Mexico and Canada in fiscal 2012.

The International market continues to bring noteworthy prospects for the company along with financial growth for the stakeholders.

Best Buy Mobile brought brisk escalation in wireless connection revenues for the company in the U.S. market and the Five Star stores continue to produce noteworthy sum of profits for the company.

Additionally, the retailer will put up the shutters on two large-format stores in Turkey and end all existing operations in the country. Moreover, China will also witness the closure of nine Best Buy-branded stores as the consequence of the restructuring actions.

As discussed earlier, the company aims to look at other profitable choices for the Best Buy brand and will revive two of the China stores later. The company expects to strengthen the functions of the Best Buy brand in China with the Five Star division.

With this move, the retailer expects to produce considerable savings of $60 to $70 million by fiscal 2013, reflecting abridged losses and reduced IT infrastructure costs allied to the proceedings taken in the China and Turkey markets.

The company also intends to bring certain changes in its supply chain operations in the U.S., for enhancing efficiency and customer service and reducing overheads. The company foresees a restructuring charge of $225 million to $245 million with the major portion to be incurred in fiscal 2011 and the balance in 2012.

The company maintains its fiscal 2011 diluted earnings forecast of $3.20 to $3.40 per share, excluding restructuring charges.

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