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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 | Link to Comment Gubbmint Cheese
Gubbmint Cheese's picture

ruh roh.

Tue, 07/19/2011 - 12:47 | Link to Comment sbenard
sbenard's picture

LOL! Thanks! I needed that!

Tue, 07/19/2011 - 12:56 | Link to Comment spiral_eyes
spiral_eyes's picture

bullish for treasuries

Tue, 07/19/2011 - 12:28 | Link to Comment Iriestx
Iriestx's picture

The banks themselves are just transitory.

 

Tue, 07/19/2011 - 12:49 | Link to Comment 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 | Link to Comment Robslob
Robslob's picture

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

Like this:

www.youtube.com/watch?v=w3QZAiKnK8k

Tue, 07/19/2011 - 12:31 | Link to Comment 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 | Link to Comment 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 | Link to Comment 101 years and c...
101 years and counting's picture

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

Tue, 07/19/2011 - 12:41 | Link to Comment frugalman
frugalman's picture

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

Tue, 07/19/2011 - 13:33 | Link to Comment 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 | Link to Comment HungrySeagull
HungrySeagull's picture

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

Tue, 07/19/2011 - 12:51 | Link to Comment 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 | Link to Comment Caveman93
Caveman93's picture

Banks! It's whats for dinner!

Tue, 07/19/2011 - 13:20 | Link to Comment csmith
csmith's picture

Pray & Delay!!!

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

I like that. Simple yet conclusive.

Tue, 07/19/2011 - 14:06 | Link to Comment 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 | Link to Comment Itsalie
Itsalie's picture

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

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