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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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Tue, 07/19/2011 - 12:27 | 1470635 Gubbmint Cheese
Gubbmint Cheese's picture

ruh roh.

Tue, 07/19/2011 - 12:47 | 1470703 sbenard
sbenard's picture

LOL! Thanks! I needed that!

Tue, 07/19/2011 - 12:56 | 1470755 spiral_eyes
spiral_eyes's picture

bullish for treasuries

Tue, 07/19/2011 - 12:28 | 1470638 Iriestx
Iriestx's picture

The banks themselves are just transitory.


Tue, 07/19/2011 - 12:49 | 1470721 sbenard
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!

Tue, 07/19/2011 - 12:30 | 1470644 Robslob
Robslob's picture

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

Like this:

Tue, 07/19/2011 - 12:31 | 1470647 aint no fortuna...
aint no fortunate son's picture

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

Tue, 07/19/2011 - 12:33 | 1470651 Pure Evil
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.

Tue, 07/19/2011 - 12:41 | 1470674 101 years and c...
101 years and counting's picture

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

Tue, 07/19/2011 - 12:41 | 1470675 frugalman
frugalman's picture

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

Tue, 07/19/2011 - 13:33 | 1470926 Confused
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.

Tue, 07/19/2011 - 12:50 | 1470727 HungrySeagull
HungrySeagull's picture

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

Tue, 07/19/2011 - 12:51 | 1470734 DB Cooper
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)! 

Tue, 07/19/2011 - 13:14 | 1470827 Caveman93
Caveman93's picture

Banks! It's whats for dinner!

Tue, 07/19/2011 - 13:20 | 1470856 csmith
csmith's picture

Pray & Delay!!!

Tue, 07/19/2011 - 13:21 | 1470860 Dr. Engali
Dr. Engali's picture

I like that. Simple yet conclusive.

Tue, 07/19/2011 - 14:06 | 1471103 digalert
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

Tue, 07/19/2011 - 18:02 | 1472087 Itsalie
Itsalie's picture

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

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