Stanley loses $578M in 1st quarter

[Guest guest]

http://finance.yahoo.com/news/-Stanley-loses-578M-in-apf-15000450.html

Stanley loses $578M in 1st quarter

Stanley loses $578M in 1st quarter, $1.6 billion in December; company

cuts dividend

Ieva M. Augstums, AP Business Writer

Wednesday April 22, 2009, 2:01 pm EDT

CHARLOTTE, N.C. (AP) -- Stanley posted a bigger-than-expected quarterly

loss to common shareholders of $578 million, hurt partly by the deteriorating

commercial real estate market.

The bank was also hit, counterintuitively, by an improvement in the value of its

own debt in the first quarter. This improvement essentially increased the amount

of debt on Stanley's books.

The Wall Street firm also slashed its quarterly dividend 81 percent to 5 cents

per share from 27 cents.

The New York-based company's report comes after several big bank rivals have

reported better-than-expected results in the last week, boosted in many cases by

strength in their investment banking businesses.

Stanley posted a loss of 57 cents per share for the January to March

period, after paying more than $400 million in dividends to preferred

shareholders. The company said it lost $1.6 billion in December.

Shares fell 69 cents, or 2.8 percent, to $23.96 in morning trading.

Stanley reported December separately because this year the company

shifted to a traditional calendar quarter. Its fourth quarter for the previous

fiscal year included September, October and November.

Stanley's first-quarter shortfall was sharper than analysts expected.

They predicted a loss of 8 cents per share.

It was also worse than last year's comparable first quarter. In that period,

Stanley earned $1.3 billion, or $1.26 per share.

Stanley lost $1 billion in the latest quarter from its investments in

real estate, and lost $1.5 billion because its own debt gained in value as

investors grew more confident about the bank's creditworthiness compared with

late last year, right after Lehman Brothers collapsed.

So if Stanley had to buy its debt back at the end of the first quarter,

it would have had to pay more for it than it would have at the end of last year.

And accounting rules require this change to be recorded as a loss.

This was the opposite of what happened to some other banks in the first quarter

-- Citigroup was able to record a $2.7 billion gain because investors grew more

worried about its creditworthiness, and in turn, reduced the debt on Citigroup's

books.

" Stanley would have been profitable this quarter if not for the dramatic

improvement in our credit spreads -- which is a significant positive

development, but had a near-term negative impact on our revenues, " said Chairman

and CEO Mack.

He added that the bank saw strong results in investment banking, commodities,

interest rates and credit products.

Other banks -- Citigroup Inc., JP Chase & Co., Wells Fargo & Co., and

Goldman Sachs Group Inc. -- have been posting first-quarter results that have

topped analysts' estimates. These results were somewhat reassuring to investors,

but they remain concerned about upcoming loan losses this year as unemployment

rises and the housing market weakens.

" Stanley's first quarter earnings show that the current environment is

still very challenging, " said Easthope, a senior analyst with consultancy

Celent. " In this climate, expect Stanley to focus on continued reduction

in the cost base and on maintaining its capital base as much as possible. "

Chief Financial Officer Colm Kelleher said in an interview Wednesday with The

Associated Press that the company " remains cautious, " though he stressed

Stanley has more than enough capital and cash on hand.

" I think this year is going to be a challenging year for people, but this firm

has its balance sheet, liquidity and capital into a place where we are uniquely

positioned to take advantage of markets where we see the right risk,

justification and terms, " he said.

The bank would like to repay back $10 billion in U.S. government loans, pending

the results of the stress tests being administered to banks by the

administration and permission from regulators, Kelleher added.