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JPMorgan: "You Are Seeing Several Hundred Additional Smaller Regional Based Banks Go"
From the JPM Earnings call (full transcript below as we comb through it - numerous interesting datapoints):
Meredith Whitney: Will you comment on the last question timing of commercial real estate,
if it's been waiting and when do you think it affects the industry?
Do you have derivative exposure, meaning derivative to someone else's real
estate exposure?
Answer: We have lending exposure that I mentioned in the commercial bank. That
was some in the investment bank. We wouldn't put those in the material kind
of category and it makes us nervous and commercial real estate and the values
have already dropped, and it's going to be recognize over the next couple of
years of people's P&Ls and take writedowns and can't refinance properties
and stuff like that we believe you are seeing several hundred additional
smaller regional based banks go-- you know, not make it and there's also
going to be a lot of capital eventually coming into the real estate business
and people try to recapitalize and buy properties at good cap rates. It
could be an opportunity for us. Not a negative over time.
Also some observations on JPM's declining VaR:
Mike Mayo: Can you give any more color on your trading which is a lot greater than
I think a lot of people expected?
Your trading revenues are flattish linked quarter, but your trades assets are
down and VAR is down. Is all your trading benefit through client flows and
wider bid spreads?
What is going on there?
Answer: VAR is a good one-point measure but VAR is going down because you are dropping off some of the more volatile time periods in the series, but the trading was drawn across most areas. There's a lot of client flow and spreads are still higher than they were at the bottom. So they're not near as high as they were after the crisis, but they're coming down a little bit. A lot of very good client business and something to train around them.
And full Earnings Presentation and Supplement:
And here is Goldman's preliminary read on JPM's results:
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There's absolutely no reason(s) that JPM would try to create a run on small regional banks now...
- They can be handed their assets for virtually nothing by the FDIC (JPM is the ultimate cherry-picker).
- They have been looking to get into CRE exposure, as they had virtually none recently.
- Competition is not acceptable.
I'm not a tax expert but could they possibly write off the losses from sold branch locations that they go through asset acquisition?
Deadhead can probably comment better, but - yes, there are very good tax deals on what and how they can write these things off. And JPM is very aggressive in 'consolidating.'
Gilgamesh, if JPM were to scoop up some small bank action it would be on the loan book, not the physical infrastructure. That action would be pushed along to PE looking to set up a shake n bake mini regional on the same same as discussed concerning WaMu tax benefits. No need to discuss the loan loss provisioning with the FDIC is there?
JPM is liquidating about 80% of the WaMu infrastructure IAW the terms of the FDIC acquisition. (NOTE to gold folks. This may be a good place to pick up your very own ready made physical structure to hold your assets on the cheap) Same same with the WaMu credit card, 2d's and HELOC's. JPM got this structured, along with all of the tax loss extensions from 2 to either 5 or 7 years on the federal depending on the line item into their deal which is what makes Lewis look so stupid right now.
BTW, this follows the killing JPM is getting from the WaMu RRE restructures and the process of this cash cow as it gets filled in. The reworks enable JPM's payment processing business to collect upwards of 80% of the total monthly payment flow leaving the securitized tranches high & dry. I wonder which side of the swaps JPM is holding on those deals?
DH - How did I do?
In part, courtesy of a weekend coup by Hammerin' Hank.
Regarding the VAR comment.
When the number goes your way, push that number. When the number doesn't go your way, diminish the relevance of the number.
Of course, this will work if the cheerleaders (also known as the dumb shit bank analysis) don't call them on it.
mayo asks the right question: how are you doinf it JD and why would it revert to normal? What is abnormal now? Is this yet another capital conduit for the banks...
I agree. The question was asked. But it, and other questions, need to be followed up and pushed. The problem is that there is a more or less cozy relationship between the banks and the analysis and often they don't do their jobs.
Also, in polite society, you don't embarrass the person you are talking to. While you might say this doesn't happen in these situations, I would beg to differ. People in power depend on this give and take dynamic to avoid the tough questions.
In sales, a similar dynamic is called implied consent, where the sales person simply moves forward with color and fit questions and moves you mentally into buying as opposed to thinking about buying.
In politics, it's about controlling the question by either not answering the question at all or by giving an entirely different answer to an unasked question you would rather have been asked. It happens all the time.
Listen to the reporters' question and then the answer. Often the reporter asked a Moon question and the politician answered a Mars question. The reporter doesn't wish to appear to be browbeating the politician and thus doesn't follow up by insisting on an answer to the original question. Bang, everyone merrily moves on and the subject is dead.
Slip sliding away.
AKA "Don't Bite The Hand That Feeds You"
Analysts and Reporters that need to publish information as part of their job, but are either too lazy to do anything other than recite a quote or - like you say - prefer to never put someone on the spot in public. And therefore there is never a chance to illicit a reason to stop the flow of information from your source.
you have made one of the most important observations
i have read in the last 6 months on zh....
this is the basis of power, newspeak, and fraud....
it is a combination of contempt and control when
the dyadic interaction you describes takes place...
it happens in corporate interactions on a pandemic
basis....it is the power of faqs - total bullshit
which is intended to steer you away from substantive
issues...
more elaborate examples of this phenomemon are
political correctness....
it is a sign of societal disintegration and
precedes economic and political collapse...study
elias howe on similar topics of court politics...
bravo!!
I read some years back in the NY Times a rationalization of the practice of reporters not following up on unanswered questions. It basically said the reporter was not a public prosecutor, that the reporters job was to report all sides fairly and leave it to the reader to figure it out.
Bullshit.
I'm not sure we EVER had a free and independent fourth estate in America but there is no doubt about it now. This forum is not the place to discuss all the details but the corporate takeover of all media outlets is self evident, including the so called independent national public radio and TV.
I remember back a decade ago when the public purse supporting public radio and TV was deliberately cut from about 70% of operating budget to less than 35%, forcing the stations to either fold or solicit corporate donations (they call it underwriting to not appear as it they are influenced by the money) or they went to CIA or privately controlled "foundations" for money. Usually they did both.
An example of the outcome is that to this day NPR won't call torture by it's real name, torture. Enhanced interrogations is what it's called by NPR when the US does it and torture when anyone else does it. Fair and balanced reporting public radio style. Even the NY Times calls it torture. But NPR can't upset those corporate doors and "foundations" can they?
The rest, as they say, is history for that section of the fourth estate. It is obvious and sickening. And as long as the American people continue to delude themselves into thinking the lemon juice they drink from the fourth estate each day is mothers milk, it won't change.
The play book was written by George Orwell and titled 1984. Time for everyone to purchase a copy and read it. You will be (re) staggered.
Is anyone else having trouble linking to the Union Sq hotel article? How do we contact ZH to ask about busted links?
"we believe you are seeing several hundred additional smaller regional based banks go-- you know, not make it" -- you know, not privy to the wall street welfare system, you know...
+1
of course this was the reason for the creation of the Federal Reserve in 1913. wildcat banks were stealing market share from the big boys and they didnt like it
Time to close accounts at the big banks and open accounts at small banks.
The Cognitive Dissonance fellow seems like an intelligent fellow but demeans himself with the use of a scatological term.
There is a time and place for everything and that usage is not appropriate in an intellectual forum or discourse.
Now that's funny. Have you actually been reading any of the comments on this forum from day to day?
The scatological term that I somehow demeaned myself with was mild compared to many many comments left on this board.
Grow up.
fuck you bitch
Whoa nellie.
JP Morgan ... be d***ned. They don't get to pick up the piece like lions on the plains.
Moral hazard says I ... we ... the responsible citizens of this country ... get that opportunity.
Too big to fail means the status quo reigns and the peons pay for it.
Nope.
If the small banks get thrown to the wolves then ... Goldman, et al, go right with'em.
I apologize ... but I'm getting ticked off about this.
Remember: Vote … it’s the preferred method of throwing the bums out
"Remember: Vote … it’s the preferred method of throwing the bums out"
Sorry man, but if voting could change anything...it would be illegal.
Vote? We just did. A whole new crew of bums came in.
hat tip to the Who:
I'll tip my hat to the new constitution
Take a bow for the new revolution
Smile and grin at the change all around
Pick up my guitar and play
Just like yesterday
Then I'll get on my knees and pray
We don't get fooled again
Don't get fooled again
No, no!
Yeaaaaaaaaaaaaaaaaaaaaaaaaah!
Meet the new boss
Same as the old boss
Yeah, vote, haha, cute. That's really cute.
VOTE WITH GUNS.
I am Chumbawamba.
"We believe will, you know, find, you know, around, like, say... uh... soon that many of the minor demons and grayish to light black haunting spirits are going to be, uhm. ... youknow, probably consigned to what we refer to (internally) as the REALLY low places..."
- Satan
Teh smaller banx weren't fascist enough to survive.
Yeah you know - disappear. How many times will
YOU have to close your chase account? LOL
This to me sounds a lot like, "too small to compete against too big to fail." Especially when we personally train America's "regulators." ;)
JPM has a property in Reno, Nevada. Wonder how that one is doing...HMMMMMMMMM
Who is Reggie Middleton and why does he keep trying to sell me something?
I have a credit card with Chase. I will change to a smaller, regional player ASAP. That is the only banking I do with one of the TBTFs.
"...here's also going to be a lot of capital eventually coming into the real estate business and people try to recapitalize and buy properties at good cap rates. It could be an opportunity for us. Not a negative over time"
Not a negative over time sounds very much like a situation that may yet be restored to profitability given time and additional resources. The very definition of catastrophe.
Dimon is just calling it as he sees it. He wasn't the one underwriting the crappy loans which will eventually cause these small banks to fail. This is not news- Sheila Bair, Bernanke, etc. have been saying there will be more failures for months. There's nothing personal about the comments, and no, he's not trying to cause a run on small banks.
Tyler, soundbites from the cc w/o an accompanying picture?
Everyday, the boys get their robo trader pictures.
I am merely asking for one day. And on this day we celebrate the genius that is Jamie Dimon, through pictures.
On a more serious note - JD playing the pr card and setting aside less bonus money than LB per employee
JPMorgan Chase & Co., the second-
largest U.S. bank, set aside $8.79 billion for compensation and
benefits for its investment-bank employees in the first nine
months of 2009, enough to pay $353,834 to each.
The compensation reserve totaled 38 percent of revenue in
the first three quarters, compared with 52 percent in the same
period of 2008, New York-based JPMorgan said today on its Web
site. The amount per employee is less than the $386,429 that
Goldman Sachs Group Inc. set aside for just the first half.
Who spends their time listening to or reading this crap? It redefines boring. Skull-bashing, brain frappéing boring.
I am Chumbawamba.
wow. two of our top analysts asking some weak questions ?
mayo - trading benefiting from wider spreads ? this is such a waste of time.
Let me see if I've got this right.
Easy credit, deregulation and lack of oversight results in a boom cycle where JPM, GS and other TBTFs make a shitload of money. Their executives make off with fuck you money.
Boom comes crashing to an end. TBTFs get stuck with a big pile of manure. Instead of eating the crap and washing it down with already banked fuck you money, they get the approval of congress to shovel the shit into a truck and dump it off on the front lawn of the American taxpayer.
After cleaning the remaining shit from bed of said dump truck, TBTFs travel in time to the future, where they load up the truck with fresh clean assets taken from offspring of today's American taxpayer.
TBTFs then use assets stolen from future generations to make huge profits and pay their executives a shitload more of fuck you money.....today! Just one year after they burned the fucking place down!
I'm done with these guys. Peace, out. Let me know when the revolution starts, I'm ready.
You left out the part where they use a little bit of the money they looted to bribe politicians to continue to do their bidding and also when they give advice on how to avoid letting them burn down the house next time (see Lloyd Blankfein in the 10/13 Financial Times: "To avoid crises, we need more transparency").
It seems that you guys are forgetting what might have brought in a windfall. Do you guys remeber Allan Greyson question about frontrunning the fed (to the fed attorney)??!!