NIM

Previewing Next Week's Main Event: What Will The BOJ Do? (Spoiler Alert: Probably Nothing)

At the BOJ's next Monetary Policy Meeting on September 20-21, the Central Bank will conduct a “comprehensive assessment” of trends in economic activity and prices under the current policy framework, as well as the policy impact, with a view to achieving its 2% price stability target at the earliest possible time. Here is what to expect from next week's main event.

US Bank Stocks Surge To 2016 Highs Despite Collapse In Yield Curve To 9 Year Lows

US bank stocks are exuberantly listening to mainstream media pushers as the hopes of a double-rate-hike-rainbow has sent S&P Financials to their highest since Dec 2015. However, despite the rise in implied rate-hike odds, the Treasury curve is utterly collapsing (which is what really matters for NIM) with 2s30s now at its lowest since 2007...

Frontrunning: July 18

  • Global stocks rise on SoftBank bid for ARM, dollar up vs yen after Turkey crushes coup (Reuters)
  • U.S. backs justice for coup plotters but urges Turkey to keep rule of law (Reuters)
  • Law and Order Will Be a Big Republican Convention Them (WSJ)
  • SoftBank to buy UK chip designer ARM in $32 billion cash deal (Reuters)
  • Rate-starved U.S. banks happily gobble mortgage business (Reuters)

Bank of America Profit Tumbles 19% As NIM Hits Record Low, EPS "Beat" On Surge In Cost-Cutting

Moments ago Bank of America joined the parade of "beating" banks despite declining earnings, when it reported adjusted Q2 EPS of $0.37 (excl. DVA), "higher" than a sharply reduced in recent weeks consensus estimate of $0.33, even as profits tumbled 19% from the $0.45 a year ago on sliding revenues of $20.6 billion ($20.4bn reported), vs consensus of $20.4 billion: the top line was $1.6 billion lower than a year ago if $0.9bn higher than Q1.

When Energy Loans Go Bad: Why America's Largest Bank Is Sliding

Wells' long overdue admission that it is woefully under-reserved for what may be a deluge of loan defaults should oil fail to rebound strongly... and certainly if oil continues to decline, has finally arrived in the form of this chart showing its LTM loan loss provision expense. It is, in a word, soaring.

JPM Revenue Rebounds On Stronger Fixed Income Trading, Jump In Lending

JPMorgan Chase & Co., the biggest U.S. bank by assets, said second-quarter profit fell 1.4 percent, beating analysts’ estimates as fixed-income trading revenue and loan growth jumped. Revenue climbed 2.8 percent to $25.2 billion, beating the $24.5 billion average estimate of seven analysts surveyed by Bloomberg. The company said average core loans increased 16 percent from a year earlier.

Goldman Prepares To Turn Bearish On Oil Again; Boosts 2016 Bond Default Target By 25%

"After a quiet Jan/Feb, E&P bankruptcies picked up steam in late 1Q ahead of spring borrowing base redeterminations. By our math, about $30bn of par value debt has defaulted in the HY E&P space YTD, representing about a 17% default rate. On the back of our bottom up analysis we are now raising our full year default forecast to 21% from 17% previously."

"An Unusual Number Of Known Unknowns" - These Are The Key Event Risks In June

In June there will be "an unusual number of known unknowns from several sources. June 2016 is a month in which the number of event risks is particularly high. In our baseline scenarios we do not see market upsets, but the potential is there: Japanese fiscal policy; meetings of the ECB, Fed and BoJ; new ECB policy implementation; a German Constitutional Court ruling; the UK referendum; elections in Spain; and a decision on the FTT are all thrown into the mix."

US Treasuries Account For A Stunning 60% Of All Global Positive Yielding Debt

Here is why US yields are, if anything, set to decline more: on the other hand, the US accounts for almost 60% of all positive yielding debt and 89% of the positive yielding debt which has a tenor less than 1YR (Figure 4). Also, US debt accounts for 74% of the positive yielding G10 debt in the 1 – 5YR sector.

Deutsche Bank Unveils The Next Step: "QE Has Run Its Course, It's Time To Tax Wealth"

"It is becoming increasingly clear to us that the level of yields at which credit expansion in Europe and Japan will pick up in earnest is probably negative, and substantially so. Therefore, the ECB and BoJ should move more strongly toward penalizing savings via negative retail deposit rates or perhaps wealth taxes. With this stick would also come a carrot – for example, negative mortgage rates."

BofA Profit Misses, Tumbles 13% On Trading Revenue Slide, Build In Energy Reserves

Expectations of a "less terrible" first quarter for banks may have been premature following yesterday's stronger than expected JPM earnings report. First it was both PNC and Blackrock missing on the top and bottom line, but the highlight of the day was Bank of America which moments ago reported $0.20 in EPS, missing expectations of a $0.21 print, while revenue ex-DVA dropped by $1.4 billion to $19.7 billion, also missing expectations of a $20bn print. BofA reported Net Income of $2.68 billion, down from $3.1 billion one year ago.

Meanwhile In Germany, An Unexpected Ad Appears

During a leisurely stroll around Germany, one may encounter many strange sights but nothing would stranger than the following ad (courtesy of Peter Barkow) which promises negative 1% interest rates for consumer loans up to 24 months.