Opening View: IndyMac Bancorp Increases Pressure on Financial Sector

Tuesday, July 8, 2008

Opening View: IndyMac Bancorp Increases Pressure on Financial Sector

Turning to financial news, IndyMac Bancorp (IMB: sentiment, chart, options) said after the close last night that Federal Deposit Insurance Corp. (FDIC) regulators are barring the company from accepting new brokered deposits after concluding that the lender isn't "well capitalized" after it failed to raise new capital. IMB is still eligible to get a waiver from the FDIC, but the company said it's not certain a waiver will be granted. IndyMac also announced that it will cut 3,800 jobs, bringing staff levels to roughly 3,400. Furthermore, the company expects that second-quarter losses could be larger than the first quarter.

In the retail sector, Office Depot (ODP: sentiment, chart, options) said that "pressure from weakening business conditions" pushed second-quarter North American same-store retail sales nearly 10% lower. For the quarter, total sales were "down slightly" as "sales trends worsened late in the quarter." ODP expects the economy to be "difficult" for the rest of 2008, but expects profit margins to improve sequentially in the third and fourth quarters.

On the earnings front, Pepsi Bottling Group (PBG: sentiment, chart, options) said that second-quarter net income rose 7% to $174 million, or 78 cents per share. Revenue jumped 5% to $3.52 billion. Analysts expected earnings of 75 cents per share on sales of $3.55 billion. PBG still expects annual earnings between $2.30 and $2.38 per share, but now sees revenue growth between 5% and 6%, down 1% from prior estimates on both the high and low end.

Finally, United Airlines (UAUA: sentiment, chart, options) and Frontier Airlines (FRNT: sentiment, chart, options) announced that they will layoff about 600 workers at the Denver International Airport. In a June 17 letter to the state, United said it would dismiss 50 customer service representatives and 100 workers classified as "ramp servicemen" in Denver beginning this week. In another letter dated June 27, Frontier Airlines said it would lay off 456 employees beginning September 1. Frontier filed for bankruptcy in April and had said at the time it would layoff employees to cut costs. United has said it would cut about 1,600 jobs through 2009.