Guest Post: Summarizing Bank Earnings With Two Charts

Tyler Durden's picture

Submitted by Tony Pallotta

Summarizing Bank Earnings With Two Charts

Now that the big banks have reported below are two charts that sum up how they are doing aside from the noise of "beating expectations."

Chart 1: Income before provisions for loan losses. The provision game is one way to "pad" earnings based on assumptions for future loan losses. By looking at income before provisions one gets a better sense of how profitable the banks are or in other words how well they can service provisions for loan losses. Notice the falling trend. In other words with flat to declining revenues and rising non interest expense the banks are simply generating less income.

Chart 2: This one says it all. Below are the total reserves as a percent of loans and leases. In other words as provisions are reduced each quarter to help pad earnings, less is set aside for future losses. What makes this chart interesting is the right axis that shows the value of home prices over the same period. How can you reduce reserves while home prices keep falling and unemployment is rising?

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Iriestx's picture

The banks themselves are just transitory.


sbenard's picture

Apparently, so are their earnings. If those earnings continue this trend, the banks will indeed become "transitory". And so will their depositor's funds!

Robslob's picture

How can you reduce reserves while home prices keep falling and unemployment is rising?

Like this:

aint no fortunate son's picture

Thanks Tony. Finally someone who gets it - that 2nd chart is great (#1 didn't suck either).

Pure Evil's picture

What is wrong with all those "evil-doers" not paying back their loans all the while incurring loan losses on banks' spreadsheets.

101 years and counting's picture

short fraud........i means banks.  long FAZ.

frugalman's picture

The accounting profession should be ashamed of itself allowing this to go on.

Confused's picture

I'm going to guess the big ones are part of the status quo.


And some of the midsize ones would like to join the club.

HungrySeagull's picture

Your shadow moving longer means the skyscraper is falling, run.

DB Cooper's picture

And B of A has $16.7  billion exposure to the PIIGS - I'm sure that won't be a problem (for them anyway but prob for us)! 

Caveman93's picture

Banks! It's whats for dinner!

csmith's picture

Pray & Delay!!!

Dr. Engali's picture

I like that. Simple yet conclusive.

digalert's picture

After 25 years, in 2009 I gave BAC the big FU.

Pulled every dime from the banksters. They still send me postage paid courtesy statements reflecting my ZERO balance. assholes

Itsalie's picture

Rosie is right (but for the wrong reason, as always) - how can we not have QE3?