Fifth Third Bank was just put on the Conviction BUY list at Goldman Sachs. When I first heard the news I thought it was a joke. It wasn't. Fifth Third Bank has Corus-esque problems with residential housing, commercial real estate, multi-family housing and land. Fifth Third Bank concentrated on Michigan, Ohio and Florida. Duhhhhh
On the flip side, Fifth Third has the power of Goldman Sachs buying up their stock and pumping more of the stock into client accounts, but unless Goldman Sachs takes Fifth Third under their wing, I see some very rough weather ahead for Fifth Third. Survival is questionable. It's starting to look like Fifth Third might be a little cozier with Goldman Sachs than most think. And the 30% run in the stock recently seems very timely for Goldman Sachs. It would be interesting if this was Goldman Sachs' means of ultimately entering legitimate banking. Goldman Sachs either didn't do their homework on this one, or they know something is coming down the pike that only they could know.
This week I did a small piece about Corus Banks, and I couldn't help but think about how Fifth Third was as out of control in residential, land and commercial, as Corus was totally stoked on condos.
I've written about Corus Banks for the past four years, and if you would have asked me four years ago if I thought they'd still be around today . . . I would have bet against it. I started calling them the walking dead four years ago. I would tell clients that these guys are dead, but they just don't know it yet. Corus did more condo loans than any other bank in the world . . . and they bragged about it non-stop.
But here we are July 2009 and Corus is still bleeding . . . and you and I and all our friends and family are paying for it. Eventually, the FDIC will step in and incinerate Corus, because it appears that is the only way to put an end to the misery. Sadly, Sheila Bair should have put this one down two years ago. In fact, bank regulators should have stepped in four years ago, when Corus was making deals that were not only horribly bad, but enriching the deal makers and bank executives. The lack of regulation will cost taxpayers hundreds of millions of dollars in the ultimate death of Corus.
The vultures are still circling Corus, but now we have a few hawks looking at the meat Corus calls assets. Corus does have some very choice condo properties here in Florida and throughout the country. Some of these will do well when a solid recovery sets in. There are also Corus properties that may eventually be torn down or used for some kind of social welfare housing, jails or who knows what.
Barry Sternlicht of Starwood Capital Group is looking, and when he looks it's time for other investors to look. I have spoken with several clients interested in Corus properties, but one problem is the FDIC. Corus can't do anything with their properties at this point, because they are just days away from the end. Anything they did now would come under extreme scrutiny, and I am not sure they legally could dump any of their assets at this point.
There is a long list of vultures and hawks looking at Corus assets. The vultures will eat anything that stinks, but the hawks will only take live prey that is fresh and tasty. As for Fifth Third, unless a Goldman Sachs doesn't come to the rescue, the only thing left will be the stinky stuff.
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