Following disappointing results from JPM and Wells Fargo yesterday, it was Bank of America's turn to "surprise" investors with its disclosure just how bad its quarter was. And with the bank reporting a 50% collapse in its sales and trading from Q3, down $600 million from a year ago to just $1.7 billion in Q4, it should come as no surprise that the bank just reported Net Income, before the usual spate of amusing addbacks, of $0.25 well below the $0.31 expected. And while one may argue whether ot not BofA's EPS deserve non-GAAP adbacks, it was the Revenue of $18.96 billion, which missed expectations of $21.03 billion by over $2 billion (!) and down $2.7 billion from a year ago, that was truly a showstropper and shows that without the Fed's visible hand manipulating markets every day, banks are a ticking time bomb just waiting to blow.
Looks like the Jefferies earnings harbinger were right, because with another quarter down, and here is another painful report by JPM, which just launched the Q4 earnings season for financials with a miss on both the top and bottom line, reporting $1.19 in EPS, well below the $1.32 consensus, and just barely above the lower estimate of $1.16. This was a decline from both the previous quarter (by 17 cents) and from a year ago (by 11 cents). Revenues missed as well, with JPM reporting $23.552 billion in top line, a decline of $560 million from a year ago ($1.6 billion lower than Q3), and below the $24.0 billion consensus. And while JPM's latest recurring, non-one time "one-time, non-recurring" charge came as a surprise to most (although how over $30 billion in legal charges can be considered one-time is beyond us), at the same time JPM once again resorted to the oldest trick in the book, taking the benefit of some $704 million in loan loss reserve releases, nearly offsetting the entire negative impact of the legal charge.
Fear Of "Surge In Debt Defaults, Business Failures And Job Losses" Means Many More Chinese Rate CutsSubmitted by Tyler Durden on 11/23/2014 10:40 -0500
The PBOC, which cut rates for the first time in two years on Friday, will have its work cut out for it. And in the worst tradition of "developed world" banks, Beijing will now have no choice but to double down on the very same bad policies that got it into its current unstable equilibrium, and proceeds with a full-blown policy flip-flop, leading to a full easing cycle that reignites the bad-debt surge once more. And sure enough, today Reuters reports citing "unnamed sources involved in policy-making" (supposedly different sources than the unnamed sources Reuters uses to float trial balloons used by the ECB and the BOJ), that "China's leadership and central bank are ready to cut interest rates again and also loosen lending restrictions" due to concerns deflation "could trigger a surge in debt defaults, business failures and job losses, said sources involved in policy-making." In other words, China has once again looked into the abyss once... and decided to dig a little more.
JPM Results Plagued By Recurring "Non-Recurring" Legal Charges, Stagnant Trading Revenues, Record Low NIMSubmitted by Tyler Durden on 10/14/2014 07:23 -0500
Another quarter down and JPM's earnings are more of the same. We don't recall if JPM's legal charges in the past few years are now $20, $30, $40 billion or more, but as of this morning they are X + $1 billion. In the company's ongoing mockery of the term "one-time, non-recurring", JPM added $1.062 billion in recurring, multiple-time pretax legal expenses, a $0.26 EPS impact to Pro Forma EPS, EPS which also declined courtesy of JPM's repurchase of $1.5 billion in shares in the quarter thus reducing the number of "S". So what were the bottom line numbers: EPS $1.36, a miss to estimate of $1.39;Revenue (non-GAAP revenue that is): $25.16 billion, better than the $24.43 billion; that said GAAP net revenue was $24.246 billion; Non-interest expense rose tom $15.8 billion, well above the $14.52 billion expected, and more than the $15.43 billion Q/Q
Bye bye NIM... The spread between 30Y and 5Y Treasury yields has collapsed to 151bps, its lowest since January 2009. It seems expectations for the exuberance of the business cycle expansion are a little underwhelming. This is half the Treasury curves peak steepness (hope) seen at the end of 2010...
If You Believe The Oil Bull Market Is Over, This Is How To Monetize Your Perspective With Up To 4x LeverageSubmitted by Reggie Middleton on 08/14/2014 12:08 -0500
Ways for retail investors, and institutions small and large, to monetize a fundamental or economic outlook that the muppet masters will never tell you!
Bank of America's $10 Billion In 2014 Legal Charges Mask Ugly Trends, Net Interest Margin Drops To Lowest On RecordSubmitted by Tyler Durden on 07/16/2014 07:00 -0500
Another quarter down, another desperate attempt by Bank of America to mask a serious underlying business deterioration using bells, whistles, and gimmicks.
JPM Earnings Slide 8% On Drop In Trading Volume, Mortgage Production Offset By $1.5 Billion Stock BuybackSubmitted by Tyler Durden on 07/15/2014 06:40 -0500
While JPM stock is trading modestly higher in the pre-market following its earnings report which beat expectations on the top and the bottom line, it doesn't hide a troubling trend seen across all the banks that have reported so far, one we forecast would take place in an environment of plunging trading volumes and near-record low mortgage production: slumping earnings. J.P. Morgan Chase JPM +0.88% & Co. said second-quarter earnings sank 7.9% as the bank continued to grapple with weak trading revenue. Indeed, as WSJ summarized, "J.P. Morgan Chase & Co. said second-quarter earnings sank 7.9% as the bank continued to grapple with weak trading revenue."
The S&P 500 continues to make higher and higher, more record-er highs predicated, as FactSet notes, on the faith in soaring expectations for much higher earnings growth for the index in the second half of 2014. Combining the reported earnings for Q1 and the estimated earnings for Q2, the first half (1H) blended earnings growth rate for the S&P 500 is 3.7%. However, combining the estimated earnings for Q3 and Q4, the second half (2H) estimated earnings growth rate jumps to 9.9%. Given this expected improvement in the overall earnings growth rate, which sectors and companies are projected to see the largest turnaround in earnings growth in 2H 2014 relative to 1H 2014? (Spoiler Alert: the answer should make you nervous).
Another day where the taken for granted overnight futures levitation is missing (despite a rather rampy USDJPY), indicates that algos are likely waiting for guidance from today's NFP data (buy if beat, buy more if miss) before committing monopoly money. The consensus for today's NFP is 218K, (up from 192K), although as Goldman notes the whisper number is as high as 240K. As DB says, the honest truth is that markets are in one giant holding pattern at the moment with volatility and conviction low. One evidence of this is the AAII weekly sentiment indicator which shows the % bullish, bearish or neutral on the US stock market for the next six months. This week the neutral indicator (40.78) is at its highest level for 9 years. No wonder volumes and volatility are low if investors are lacking a directional bias. Yesterday’s reaction to the ISM manufacturing was interesting. Though the headline number came in firmer than expected (54.9 vs 54.3 expected) and more than 1pt higher than last month’s reading of 53.7, the UST and equity reaction suggested that the data had actually surprised to the downside.
Bank Of America Reports Q1 Loss On Massive Legal Charge, Ongoing Operations Disappoint As NIM TumblesSubmitted by Tyler Durden on 04/16/2014 06:44 -0500
Moments ago Bank of America reported its Q1 earnings, and as expected, they were quite a mess, with the bank posting an actual loss of $0.05 on expectations of a $0.27 beat, which however - in the spirit of JPM - was the result of a $6 billion pretax charge related to various litigation items, which amounted to $0.40 per share. So Bank of America would like you, dear bank analysts, to do what you do to JPM every quarter with its recurring "non-recurring" litigation item, and please add it back. But what is worse is that Bank of America reported Net Interest Income of $10.1 billion, far below the expected $11 billion, and an amount that had nothing to do with legal fees, "one-time" charges and reserve releases. Why was this number so weak? Because not only does BofA's balance sheet continue to collapse, with its mortgage services portfolio crashing from $1.185 trillion to just $780 billion, but because BofA just reported the lowest NIM, or Net Interest Yield as it likes to call it, in history at 2.29%. So much for that NIM surge that everyone was expecting.
We asked this question a quarter ago following the quarterly results by Wells Fargo - America's biggest mortgage lender - but we never got an appropriate answer. So now that the data has been updated for the latest Wells mortgage origination and application numbers, we ask the question again: considering both mortgage originations and applications are crashing to levels not seen since the Lehman crisis, just what is wrong with this "housing recovery" picture?
After a selloff as violent as that of last night, usually the overnight liftathon crew does a great job of recovering a substantial portion of the losses. Not this time, which coupled with the sudden and quite furious breakdown on market structure, leads us to believe that something has changed rather dramatically if preserving investor confidence is not the paramount issue on the mind of the NY Fed trading desk. Nikkei 225 (-2.38%) suffered its worst week since March'11 amid broad based risk off sentiment following on from a lower close on Wall St. where the Nasdaq Biotech index suffered its largest intra-day decline since August 2011. Negative sentiment carried over into European session, with stocks lower across the board (Eurostoxx50 -1.17%) and tech under performing in a continuation of the recent sector weakness seen in the US. JP Morgan (JPM) due to report earnings at 7:00AM EDT and Wells Fargo (WFC) at 8:00Am EDT.
JPY crosses were in charge of stocks again today - and not in a good way - as a sideways market gave way to weakness late on as Goldman released part two of their market-bashing research. With the dramatic help of AXP and V (78 of the Dow's 41 points!), the Dow was the only index green today and managed to close just green on the week. Since the taper, Homebuilders have tumbled from heroes to almost zeroes (+1.5% from +6.5% at year-end in spite of the big drop in TSY yields in recent weeks) with Healthcare outperforming (+5.5%). Away from stocks, things were also escalating rapidly this afternoon. Treasury yields limped lower all day then dropped notably starting around 1445ET with 30Y -5bps on the week (and 5s30s at 212bps - the flattest term structure in 4 months). The USD rose on the day (up 0.75% on the week) led by EUR weakness (JPY was relatively stable). Despite the USD strength, gold and silver closed green on the week (+0.25% and+0.7% respectively) but WTI crude led the way up 1.5% on the week at $94.10. Despite valiant efforts to VIX-slam the market higher into the close, the S&P closed red and VIX +0.6vols higher on the week at 12.7%