Jim Chanos is president and founder of $6 billion, New York-based Kynikos Associates, a global long-short investment firm that employs fundamental analysis when choosing investments. In an interview Wednesday with CNBC, he explained his views on the global financial in terms of a “credit python” with China at the beginning going in, Europe in the middle and the U.S. at the end. As a result, he has taken long and short positions in various banks, although “nothing he is jumping up and down about,” he said. “Things have gotten expensive pretty quickly,” he added.
Though Chanos does not reveal his short positions, his long positions in banks as of the end of the second quarter are: JPMorgan Chase (JPM, Financial), Deutsche Bank AG (DB, Financial), Citigroup (C, Financial) and Royal Bank of Scotland Group Plc (RBS, Financial).
JPMorgan Chase (JPM)
JPMorgan Chase & Co. is a global financial services firm. JPMorgan Chase & Co. has a market cap of $149.3 billion; its shares were traded at around $41.22 with a P/E ratio of 9.1 and P/S ratio of 1.5. The dividend yield of JPMorgan Chase & Co. stocks is 3.1%.
Chanos initiated his position in JPMorgan in the fourth quarter of 2011 at an average price of $32, then sold some of the holding in the first quarter of 2012 after the stock rose to an average price of $39. In the second quarter of 2012 he bought 231,800 shares of the company at an average price of $38, making the stock 4.5% of his portfolio, or 323,400 shares.
During the second quarter, when Chanos added to his position, JPMorgan’s stock lost more than 20% in a month due to a multi-billion-dollar derivatives trading loss. On May 10, the day the bank’s CEO, Jamie Dimon, announced the loss, the stock price closed at $40.74. It has since recovered to $41.25 per share as of Thursday.
In July, the bank announced that the amount of estimated trading losses had increased to $4.4 billion. In spite of the losses, it still announced second-quarter net income of $5 billion, compared to $5.4 billion the prior year. It also said its Chief Investment Office would cease making the kind of investments that caused the losses.
Deutsche Bank AG (DB)
Deutsche Bank is an international financial service provider. Deutsche Bank AG has a market cap of $37.06 billion; its shares were traded at around $42.2118 with a P/E ratio of 10.2 and P/S ratio of 0.5. The dividend yield of Deutsche Bank AG stocks is 2.3%. Deutsche Bank AG had an annual average earnings growth of 22.1% over the past 10 years.
Chanos increased his position, which he initiated in the third quarter of 2011, by almost 141% in the second quarter, bringing his total shares to 211,300, or 3% of his portfolio.
In the second quarter, Deutsche bank reported net income of EUR 66.1 million, down from EUR 1.2 billion the prior year. The bank’s earnings were negatively affected by the European sovereign debt crisis, which weighed on investor confidence and client activity. Its core tier 1 ratio ended the quarter at 10.2%, higher than the European Banking Authority’s 9% threshold.
Citigroup (C)
Citigroup Inc., the global financial services company, has some 200 million customer accounts and does business in more than hundred countries, providing consumers, corporations, governments, and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management. Citigroup Inc. has a market cap of $94.06 billion; its shares were traded at around $33.83 with a P/E ratio of 8.7 and P/S ratio of 1.2. The dividend yield of Citigroup Inc. stocks is 0.1%.
Chanos possessed 383,700 shares of Citigroup at the second quarter’s end, after adding 279,000 shares that quarter at an average price of $30. The holding comprises 4.1% of his portfolio. Year to date, the company’s stock has gained 28.5%.
In the second quarter, Citigroup had net income of $2.9 billion, or $0.95 per diluted share, on revenues of $18.6 billion. The prior year, the bank reported net income of $3.8 billion, or $1.09 per share, on revenues of $20.6 billion. A net loss from a sale of a stake in Akbank T.A.S. contributed to the decline in earnings. The decline in revenues was primarily due to the ongoing wind down of Citi Holdings.
Royal Bank of Scotland Group Plc (RBS)
The Royal Bank of Scotland Group Plc is the holding company of one of the world's largest banking and financial services groups, with a market capitalization of $248.9 billion. Royal Bank of Scotland Group Plc has a market cap of $23.4 billion; its shares were traded at around $8.72 with a P/E ratio of 6.9 and P/S ratio of 0.4.
Chanos increased his holding of RBS by 156% in the second quarter at an average price of $7, bringing his total number of shares to 1,089,000 at quarter end. Year to date, RBS stock has gained 37%.
In the first half of 2012, RBS’s customer deposits grew by £7 billion from the prior year, though the company’s credit was downgraded during the second quarter. The bank also had operating profit of £1.8 billion, after costs related to a technology incident in June and a provision for interest rate swap mis-selling. Without the provisions, the results were flat from the prior year.
To see more of Chanos’ holdings, see his portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Jim Chanos.
Though Chanos does not reveal his short positions, his long positions in banks as of the end of the second quarter are: JPMorgan Chase (JPM, Financial), Deutsche Bank AG (DB, Financial), Citigroup (C, Financial) and Royal Bank of Scotland Group Plc (RBS, Financial).
JPMorgan Chase (JPM)
JPMorgan Chase & Co. is a global financial services firm. JPMorgan Chase & Co. has a market cap of $149.3 billion; its shares were traded at around $41.22 with a P/E ratio of 9.1 and P/S ratio of 1.5. The dividend yield of JPMorgan Chase & Co. stocks is 3.1%.
Chanos initiated his position in JPMorgan in the fourth quarter of 2011 at an average price of $32, then sold some of the holding in the first quarter of 2012 after the stock rose to an average price of $39. In the second quarter of 2012 he bought 231,800 shares of the company at an average price of $38, making the stock 4.5% of his portfolio, or 323,400 shares.
During the second quarter, when Chanos added to his position, JPMorgan’s stock lost more than 20% in a month due to a multi-billion-dollar derivatives trading loss. On May 10, the day the bank’s CEO, Jamie Dimon, announced the loss, the stock price closed at $40.74. It has since recovered to $41.25 per share as of Thursday.
In July, the bank announced that the amount of estimated trading losses had increased to $4.4 billion. In spite of the losses, it still announced second-quarter net income of $5 billion, compared to $5.4 billion the prior year. It also said its Chief Investment Office would cease making the kind of investments that caused the losses.
Deutsche Bank AG (DB)
Deutsche Bank is an international financial service provider. Deutsche Bank AG has a market cap of $37.06 billion; its shares were traded at around $42.2118 with a P/E ratio of 10.2 and P/S ratio of 0.5. The dividend yield of Deutsche Bank AG stocks is 2.3%. Deutsche Bank AG had an annual average earnings growth of 22.1% over the past 10 years.
Chanos increased his position, which he initiated in the third quarter of 2011, by almost 141% in the second quarter, bringing his total shares to 211,300, or 3% of his portfolio.
In the second quarter, Deutsche bank reported net income of EUR 66.1 million, down from EUR 1.2 billion the prior year. The bank’s earnings were negatively affected by the European sovereign debt crisis, which weighed on investor confidence and client activity. Its core tier 1 ratio ended the quarter at 10.2%, higher than the European Banking Authority’s 9% threshold.
Citigroup (C)
Citigroup Inc., the global financial services company, has some 200 million customer accounts and does business in more than hundred countries, providing consumers, corporations, governments, and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management. Citigroup Inc. has a market cap of $94.06 billion; its shares were traded at around $33.83 with a P/E ratio of 8.7 and P/S ratio of 1.2. The dividend yield of Citigroup Inc. stocks is 0.1%.
Chanos possessed 383,700 shares of Citigroup at the second quarter’s end, after adding 279,000 shares that quarter at an average price of $30. The holding comprises 4.1% of his portfolio. Year to date, the company’s stock has gained 28.5%.
In the second quarter, Citigroup had net income of $2.9 billion, or $0.95 per diluted share, on revenues of $18.6 billion. The prior year, the bank reported net income of $3.8 billion, or $1.09 per share, on revenues of $20.6 billion. A net loss from a sale of a stake in Akbank T.A.S. contributed to the decline in earnings. The decline in revenues was primarily due to the ongoing wind down of Citi Holdings.
Royal Bank of Scotland Group Plc (RBS)
The Royal Bank of Scotland Group Plc is the holding company of one of the world's largest banking and financial services groups, with a market capitalization of $248.9 billion. Royal Bank of Scotland Group Plc has a market cap of $23.4 billion; its shares were traded at around $8.72 with a P/E ratio of 6.9 and P/S ratio of 0.4.
Chanos increased his holding of RBS by 156% in the second quarter at an average price of $7, bringing his total number of shares to 1,089,000 at quarter end. Year to date, RBS stock has gained 37%.
In the first half of 2012, RBS’s customer deposits grew by £7 billion from the prior year, though the company’s credit was downgraded during the second quarter. The bank also had operating profit of £1.8 billion, after costs related to a technology incident in June and a provision for interest rate swap mis-selling. Without the provisions, the results were flat from the prior year.
To see more of Chanos’ holdings, see his portfolio here. Also check out the Undervalued Stocks, Top Growth Companies and High Yield stocks of Jim Chanos.
