Guest View
User: Pass: | become a member
Posts Tagged ‘loan losses’

How much money is Wells Fargo really making?

How much money is Wells Fargo really making?

Courtesy of Edward Harrison at Credit Writedowns

Wells FargoThe positive earnings announcement by Wells Fargo on Wednesday was marred by a sell recommendation from Dick Bove and a lot of chatter about credit writedowns and mortgage servicing rights (MSRs). I wanted to add a few words about the report, MSRs, and bank stocks more generally.

First of all, this has been a very good quarter for bank earnings. Many of the big names globally have surprised to the upside. this includes Goldman Sachs, Morgan Stanley, JPMorgan Chase, Wells Fargo, US Bancorp, SEB in Sweden, Credit Suisse in Switzerland and on down the line. As one would expect, most banks are profiting from record low interest rates.

The question for the big banks is whether the huge writedowns they are still taking and the run-up in their stock prices since march limits any upside in valuation. For smaller banks, we should expect weaker results as they are more leveraged to the sectors of the economy like commercial real estate and construction loans which are still suffering.  Goldman and Morgan Stanley should do relatively better as they are really broker-dealers and both investment banking and sales & trading are doing well right now. On the whole, I have said I think upside is limited for the sector, but downside is vast. Hence I am bearish on bank stocks.

Let’s look at Wells Fargo (WFC) as an example of what is happening.

Wells reports record profits

Wells reported net income of $32 billion, a robust operating pre-tax profit of $10.8 billion, and record net income of $3.2 billion. Sounds wonderful. What’s not to like?  That was bank analysts Dick Bove’s initial impression as well. Live on-air at CNBC, he said Wells Fargo “is proving itself to be a standout.”


But, once Bove got a peek under the hood and started to crunch the numbers at Wells, he was significantly less impressed – so much so that he issued a sell rating literally nine hours later. And he took a lot of flak for this about-face.

The Wall Street Journal’s Market Beat reports:

Prominent banking analyst Dick Bove, who caused a stir Wednesday with seemingly contradictory remarks on Wells Fargo, has decided he’ll no longer provide immediate earnings commentary on air.

“I’m not


continue reading


Tags: , , , , , , , , , ,




One Sixth Of All Construction Loans In Trouble

One Sixth Of All Construction Loans In Trouble

construction loansCourtesy of Mish

The New York Times has an interesting article about construction loans that Inquiring minds will want to read. Please consider Construction Loans Falter, a Bad Omen for Banks.

Reports filed by banks with the Federal Deposit Insurance Corporation indicate that at the end of June about one-sixth of all construction loans were in trouble. With more than half a trillion dollars in such loans outstanding, that represents a source of major losses for banks.

Construction loans were highly attractive in recent years for many banks, particularly smaller ones without a national presence. One reason was that other types of loans were not easy to make. A handful of big banks came to dominate credit card loans, for example, and corporate loans were often turned into securities.

Construction loans, however, needed local expertise and were not easy to standardize. In a booming real estate market, there were few losses on such loans.

It is in commercial real estate construction — be it stores or office buildings — that the pain seems likely to rise. At the end of June, $291 billion in such loans was outstanding, down only a few billion from the peak reached earlier this year.

“On the commercial side,” said Matthew Anderson, a partner in Foresight Analytics, a research firm based in Oakland, Calif., “I think we are fairly early in the down cycle.”

Foresight estimates that 10.4 percent of commercial construction loans are troubled, but expects that to increase as the year goes on.

Construction Loans Problems By Type

Local Expertise? What Local Expertise?

One has to laugh at the statement "Construction loans, however, needed local expertise".

In regards to "local", Pray tell what did Chicago-based Corus bank know about condo construction in Florida, California, and Georgia?

Indeed, what expertise was displayed by anyone, anywhere in regards to construction loans?

How Bad An Omen?

Just how bad an omen this is for banks depends on whether or not the problem is getting worse (it is), and how much banks have allocated in loan loss provisions.

In regards to loan loss provisions, here are a few pertinent charts from How Overpriced Is The S&P 500?

Assets at banks whose ALLL exceeds Nonperforming loans

Banks with Total Assets from $1B to $10B where


continue reading


Tags: , , ,




China Trying to Talk Its Way Out of a Bubble

China Trying to Talk Its Way Out of a Bubble

China bubble Courtesy of Ben the Financial Ninja

FN: The Chinese government has finally caught on to the fact that they’ve created a bubble and are trying to "talk it down". As long as the central bank and the rest of the banks continue to provide liquidity, Wen Jiabao is going to be as successful as Alan Greenspan was when he warned of "irrational exuberance" while having his foot placed firmly on the monetary accelerator.

China Stocks Decline as Wen Says Economy Faces ‘Uncertainties’: "Chinese stocks, the world’s worst performers this month, extended declines after Premier Wen Jiabao said the economy faces many “uncertainties” and China Construction Bank Corp. warned of asset bubbles."

Asian Stocks Fall on Lower China Earnings, U.S. Credit Concern: "Asian stocks dropped, led by mining and finance companies on lower profit at Chinese companies and amid speculation loan losses in the U.S. will increase."

 


Tags: , , , , ,




 

Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at jennifersurovy@yahoo.com with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

http://www.youcaring.com/medical-fundraiser/help-get-shadowfax-out-from-the-darkness-of-medical-bills-/126743

Thank you for you time!

 
 

Zero Hedge

Top Scientist Warns This Version Of Ebola Looks Like "A Very Different Bug"

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

Submitted by Michael Snyder via The Economic Collapse blog,

Barack Obama and the head of the CDC need to quit saying that we know exactly how Ebola spreads.  Because the truth is that there is much about this virus that we simply do not know.  For example, a top Ebola scientist that is working in the heart of the outbreak in Liberia says that this version of Ebola looks like it could be "a very different bug" from past versions.  Other leading scientists are echoing his concerns.  And yet Barack Obama and Thomas Frieden c...



more from Tyler

Chart School

Weekly Gasoline Price Update: Down Another Nine Cents

Courtesy of Doug Short.

It's time again for my weekly gasoline update based on data from the Energy Information Administration (EIA). Rounded to the penny Regular dropped another nine cents and Premium eight cents. Regular is now at its lowest price since January 2011.

According to GasBuddy.com, only one state (Hawaii) has Regular above $4.00 per gallon. The highest continental average price is in California at 3.49. Missouri has the cheapest Regular at $2.76.

How far are we from the interim high prices of 2011 and the all-time highs of 2008? Here's a visual answer.

...



more from Chart School

Phil's Favorites

M&A Deals Fail At Highest Rate Since 2008

Courtesy of Mish.

In yet another potential market topping sign, M&A Deals Fail At Highest Rate Since 2008
The value of deals that fail to complete has reached its highest level since 2008, in the latest sign that the best year for mergers and acquisitions since the financial crisis will also feature a number of high-profile failures.

Three large deals collapsed last week, adding to the list of wrecked deals and coinciding with a sharp jump in equity market volatility that sapped confidence in stocks and put a chill on the market for initial public offerings.

The biggest blow to dealmaking prospects came as US pharmaceutical group AbbVie unexpectedly dropped its support for a $55...



more from Ilene

All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.




To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

more from David

OpTrader

Swing trading portfolio - week of October 20th, 2014

Reminder: OpTrader is available to chat with Members, comments are found below each post.

 

This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...



more from OpTrader

Insider Scoop

UPDATE: Bank Of America Reiterates On ITT Educational Services As Shares Surge But Risks Remain

Courtesy of Benzinga.

Related ESI Urban Outfitters Drops On Q4 Profit Warning; Mead Johnson Nutrition Shares Spike Higher ITT Educational Services Shares Soar On Preliminary Results

In a report published Monday, Bank of America analyst Sara Gubins reiterated an Underperform rating on ITT Educational Services, Inc. (NYSE: ESI), and raised the price target from $7.00 to $8.00.

In the report, Bank of America noted, “ESI shares rall...



http://www.insidercow.com/ more from Insider

Market Shadows

Falling Energy Prices: Sober Look takes a Sober Look

Falling Energy Prices: Sober Look takes a Sober Look

What do falling energy prices mean for the US consumer? Sober Look writes a brief yet thorough overview of the consequences of the correction in the price of crude oil. There are good aspects, particularly for the consumer, bad aspects, and out-right ugly possibilities. For more on this subject, read James Hamilton's How will Saudi Arabia respond to lower oil prices?  In previous eras, Saudi Arabia would tighten the supply to help increase prices, but in this "game of chicken," the rules m...



more from Paul

Stock World Weekly

Stock World Weekly

Newsletter writers are available to chat with Members regarding topics presented in SWW, comments are found below each post.

Here's this week's Stock World Weekly. Just sign in with your PSW user name and password. (Or take a free trial.)

#457319216 / gettyimages.com

 

...

more from SWW

Sabrient

Sector Detector: Semiconductors get slammed as investors scramble to protect profits

Courtesy of Sabrient Systems and Gradient Analytics

Volatility continues to increase in the stock market and many of the leaders are breaking down. In particular, semiconductors took a rather big hit when one of the bellwethers warned of weakening global demand. Nevertheless, despite the significant headwinds, I do not think this spells the end of the bull market. But the technical damage to the charts is severe, particularly to the small caps, which are in full-blown correction mode. The large caps must show leadership and rally immediately -- or it will put at risk the critical and widely-anticipated year-end rally.

In this weekly update, I give my view of the current market environment, offer a technical analysis of the S&P 500 chart, review our weekly fundamentals-based SectorCast rankings of the ten U.S. business sectors, and then offer up ...



more from Sabrient

Option Review

Release Of Fed Minutes, Icahn Tweet Boost Shares In Apple

Shares in Apple (Ticker: AAPL) are near their highs of the session in the final hour of trading on Wednesday, adding to the muted gains seen earlier in the day, following the release of the September FOMC meeting minutes and after activist investor and Apple shareholder Carl Icahn tweeted, “Tmrw we’ll be sending an open letter to @tim_cook. Believe it will be interesting.” Icahn’s tweet hit the ether at 2:33 pm ET and was met with a spike in volume in Apple shares. The stock is currently up 2.0% on the day at $100.75 as of 3:15 pm ET.

Chart – Apple rally accelerate...



more from Caitlin

Digital Currencies

Bitcoin Has Been Getting Obliterated

Joe has found a place for Bitcoins, and if you hold a lot of them, you won't like it.

Bitcoin Has Been Getting Obliterated

Courtesy of 

Remember Bitcoin?

There's not much to say about it, except that it's doing TERRIBLY.

Here's a chart going back to earlier this summer. Charts don't get uglier than this.

Bitcoinwisdom

Interestingly, the Bitcoin industry continues to be quite excited about the prospects for the digital currency, and there continue to be announcements about expand...



more from Bitcoin

Promotions

Last Chance! See The 'Google-Like' Trading Algorithm 'Live' TODAY

Traders and Investors,

RSVP NOW to attend a special presentation TODAY at Noon or 9:00 pm ET, where you’ll see a powerful trading algorithm that’s been tested and proven to return phenomenal results on a consistent basis. 

In fact, it has an 82% win rate…

And had you only traded the conservative alerts recommended by the algorithm since inception, you would have experienced portfolio gains of more than 200%!

Register NOW and secure your virtual seat for one of Today’s LIVE presentations.

When you register for the webinar, you’ll also get instant access to following trading videos:

  • Instant access to FOUR Quick-Start Expectancy...


more from Promotions

Pharmboy

Biotechs & Bubbles

Reminder: Pharmboy is available to chat with Members, comments are found below each post.

Well PSW Subscribers....I am still here, barely.  From my last post a few months ago to now, nothing has changed much, but there are a few bargins out there that as investors, should be put on the watch list (again) and if so desired....buy a small amount.

First, the media is on a tear against biotechs/pharma, ripping companies for their drug prices.  Gilead's HepC drug, Sovaldi, is priced at $84K for the 12-week treatment.  Pundits were screaming bloody murder that it was a total rip off, but when one investigates the other drugs out there, and the consequences of not taking Sovaldi vs. another drug combinations, then things become clearer.  For instance, Olysio (JNJ) is about $66,000 for a 12-week treatment, but is approved for fewer types of patients AND...



more from Pharmboy



FeedTheBull - Top Stock market and Finance Sites



About Phil:

Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

Learn more About Phil >>


As Seen On:




About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

Market Shadows >>