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


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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


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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."

 


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Zero Hedge

The Moment Of Maximum Peril - Clinton Vs. Trump

Courtesy of ZeroHedge. View original post here.

Submitted by Matthew Jamison via Strategic-Culture.org,

With the conclusion of the summer political conventions in America and Labor Day approaching in the States, the race for the White House is entering its final phase. The Republican and Democrat gatherings in Cleveland and Philadelphia respectively where poles apart and presented two starkly different visions of America.

...



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Chart School

A Wild Day: Profit Takers Take To The Streets

Courtesy of Declan.

Yellen's speech pushed markets both up and down, but probably left more minds stuck in indecision than offered a clear path forward. Markets don't like indecision, which gives bears and weak longs an opportunity to sell. There are still key support levels to break, but recent weeks of tight action could lead to an unraveling.

The S&P finished as registered distribution with new 'sell' triggers in On-Balance-Volume and Directional Indicator. The index has been stuck in a relative downward turn since July (against Small Caps). This index is offering the clearest 'sell' signal.

...

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Market News

News You Can Use From Phil's Stock World

 

Financial Markets and Economy

Japan Pension Giant’s Losses Imply a $53 Billion Stock Splurge (Bloomberg)

The world’s biggest pension fund has room for a Japan stock shopping spree after the value of its investments tumbled last quarter.

U.K.’s May Orders Brexit Plans Ahead of G-20, Newspapers Report (Bloomberg)

U.K. Prime Minister Theresa May asked her cabinet ministers to come up with a blueprint for how their departments may be able to benefit from Britain’s exit from the European Union ahead of the Group of...



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ValueWalk

Meb Faber: The Trinity Portfolio

By Guest Post. Originally published at ValueWalk.

The Trinity Portfolio by Meb Faber

Guest: Episode 15 is just Meb.

Date: 8/10/16

Run-Time: 42:53

Topics: Meb tries something new in Episode 15. In “audio book” style, he walks listeners through his latest research piece: The Trinity Portfolio. “Trinity” reflects the three pillars of this investing approach: globally-diversified assets, weightings toward value and momentum investments, and active trend-following. On one hand, Trinity is broad and sturdy, rooted in respected, wealth-building investment principles. On the other hand, it’s strategic and int...



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Phil's Favorites

Here's Why B of A's Chart of Fast Growing Low Wages Is BS

Courtesy of Lee Adler of the Wall Street Examiner

Good guy Sam Ro, now at Yahoo, tweeted out a chart by Bank of America Merrill Lynch (BAML) this morning showing that low wage job gains have outpaced gains in high wage jobs.I happen to keep charts on wage growth by industry, so I know a little about the subject. I had my usual calm and measured response.

@bySamRo Hell NO, Sam Ro! It’s all relative, isn’t it? Tell BAML they’re full of shit. pic.twitter.com/WFtsM3Siur

— Wall Street Examiner (@Lee_Adler) August 26, 2016

...



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Kimble Charting Solutions

Basic Materials attempting breakout says Joe Friday

Courtesy of Chris Kimble.

Basic Materials stocks can often times give a decent snap shot of how an economy is doing from a growth or lack of perspective. Below looks at Basic Materials ETF (IYM) over the past decade.

CLICK ON CHART TO ENLARGE

IYM remains inside of an upward sloping mult-year rising channel (1), since 2009. It hit the bottom of this channel earlier this year and has bounce off support. Currently IYM is testing f...



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Biotech

Epizyme - A Waiting Game

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

Epizyme was founded in 2007, and trying to create drugs to treat patient's cancer by focusing on genetically-linked differences between normal and cancer cells. Cancer areas of focus include leukemia, Non-Hodgkin's lymphoma and breast cancer.  One of the Epizme cofounders, H. Robert Horvitz, won the Nobel Prize in Medicine in 2002 for "discoveries concerning genetic regulation of organ development and programmed cell death."

Before discussing the drug targets of Epizyme, understanding epigenetics is crucial to comprehend the company's goals.  

Genetic components are the DNA sequences that are 'inherited.'  Some of these genes are stronger than others in their expression (e.g., eye color).  Yet, some genes turn on or off due to external factors (environmental), and it is und...



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OpTrader

Swing trading portfolio - week of August 22nd, 2016

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 ...



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Digital Currencies

Man Who Introduced Millions to Bitcoin Says Blockchain Is a Bust

 

Man Who Introduced Millions to Bitcoin Says Blockchain Is a Bust 

By  at Bloomberg

Excerpt:

Stefan Thomas, who introduced millions of people to bitcoin, has had a change of heart.

Blockchain, the ledger software that makes the digital currency possible...



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Mapping The Market

Illusion of Choice

From Jean-Luc:

Looks like we are down to about 10 companies for our consumer goods:

http://www.visualcapitalist.com/illusion-of-choice-consumer-brands/

Just like banks, airlines and cable companies! 

The Illusion of Choice in Consumer Brands

Explore the full-size version of the above graphic in all its glory.

If today’s infographic looks familiar, that’s because it originates from a well-circulated report that Oxfam International puts together to show consolidation i...



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All About Trends

Mid-Day Update

Reminder: Harlan 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...

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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!




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