Updated Derivative Exposure and Bank Consolidation

First, an updated picture of the banks with massive derivative exposure -

The consolidation in the big derivative players continued last week. It should not surprise you how things played out. Here is a recap –

"National City #14 is being bought by PNC Financial #10. The US Government is giving PNC about $9 billion to do the deal. PNC is “selling” $8.9 billion in “preferred stock” to the government. This is just the government paying PNC for the $9 billion loss they will take for “buying” National City. "

"Suntrust #9 is going to “sell” between $2 billion and $4 billion in “preferred stock” to the US Government."

There are now only seven banks yet to merge. On 10/21 I wrote the following about National City (NCC) –

“I think NCC will either get nationalized or bought by a larger bank in the not too distant future.”
On 10/21 I wrote the following about PNC Financial –

“I think they will be buyers and not sellers. Just a guess, but we'll see.””Remember, they can only by buyers if the Fed gives them big piles of money. So expect these guys to get bailed out. In Fed Speak, it will be a "injection of capital" in the form of the Fed buying preferred stock "at no risk to the taxpayer".”

Here is what I wrote about Suntrust on 10/21 –

“The 2 stragglers are Suntrust (STI) #9 and Northern Trust (NTFS) #11In my opinion, these are coin flips are to whether they are acquirers or acquirees.”

The 10/21 post is here –

http://nbcharts.blogspot.com/2008/10/national-city-14-on-derivative-list.html

You can read more detailed analysis of which banks have exposure to derivatives here –

http://nbcharts.blogspot.com/2008/10/lehman-cds-settlement-on-october-21.html

http://nbcharts.blogspot.com/2008/10/derivative-endgame.html