Displaying items by tag: charge offs

As anticipated in the latest forensic analysis, JPMorgan Chase & Co., the biggest credit-card lender, said defaults climbed to a 2009 high of 8.81 percent from 8.02 percent in October. Delinquencies for the New York-based bank fell to 4.9 percent from 4.95 percent.

pdf  JPM Public Excerpt of Forensic Analysis Subscription 2009-09-22 14:33:53 1.51 Mb

pdf  JPM Forensic Report (092209) Final- Retail 2009-09-24 03:12:17 130.93 Kb

pdf  JPM Report (092209) Final - Professional 2009-09-24 03:13:31 550.72 Kb

Defaults at Bank of America Corp., the No. 2 card lender, fell to 13 percent from 13.22 percent, while late payments increased to 7.69 percent from 7.59 percent, the Charlotte, North Carolina-based bank said in a federal filing.

pdf  BAC Swap exposure_011009 2009-10-15 01:02:21 279.76 Kb   - Is BAC the next AIG?

Capital One Financial Corp., the third-biggest issuer of Visa Inc. credit cards, posted increases in defaults and delinquencies. Write-offs climbed to 9.6 percent from 9.04 percent, and payments at least 30 days overdue rose to 5.87 percent from 5.72 percent, McLean, Virginia-based Capital One said.

As anticipated in the latest forensic analysis, JPMorgan Chase & Co., the biggest credit-card lender, said defaults climbed to a 2009 high of 8.81 percent from 8.02 percent in October. Delinquencies for the New York-based bank fell to 4.9 percent from 4.95 percent.

pdf  JPM Public Excerpt of Forensic Analysis Subscription 2009-09-22 14:33:53 1.51 Mb

pdf  JPM Forensic Report (092209) Final- Retail 2009-09-24 03:12:17 130.93 Kb

pdf  JPM Report (092209) Final - Professional 2009-09-24 03:13:31 550.72 Kb

Defaults at Bank of America Corp., the No. 2 card lender, fell to 13 percent from 13.22 percent, while late payments increased to 7.69 percent from 7.59 percent, the Charlotte, North Carolina-based bank said in a federal filing.

pdf  BAC Swap exposure_011009 2009-10-15 01:02:21 279.76 Kb   - Is BAC the next AIG?

Capital One Financial Corp., the third-biggest issuer of Visa Inc. credit cards, posted increases in defaults and delinquencies. Write-offs climbed to 9.6 percent from 9.04 percent, and payments at least 30 days overdue rose to 5.87 percent from 5.72 percent, McLean, Virginia-based Capital One said.

PNC has reported strong accounting earnings for Q3-09 and lower charge-offs as well as lower 90 day lates. The press and the blogs were all over it as a news search in Google reveals:

PNC Financial Services profit jumps 88% - MarketWatch PNC Financial Services Group (NYSE:PNC) said that its third-quarter net profit jumped to $467 million, or $1.00 a share, ...

The sell side jumps on the bandwagon as well... Wells Fargo Upgrades PNC Financial Services Group (PNC) to Outperform; Raises ... StreetInsider.com (subscription)

As a result their share jumped more than 10%.

But, and there is always a but, if we look at the bigger picture things really don't look so rosy...

As a matter of fact, if anyone really bothered to look at the numbers offered (not even the real 10Q numbers, but the numbers offered in the conference call), one would realize that there was no real improvement in asset quality, despite lower charge-offs. As a matter of fact, asset quality AND loan quality got worse, not better - both quarter over quarter and year over year!!! This was the crux of the share price collapse in PNC to begin with. What the hell is wrong with those charged with analyzing these companies??? 

You know, I happen to really, really appreciate the blogoshpere. There are a select handful of blogs that offer unique, insightful and very difficult to come by expertise, opinion and commentary. Much more so than the mainstream media and even more so than the more specialized media. Despite this, there are certain components of the MSM and corporate America that still do not respect the blogs. Now, why is that? Well, I dare you - no, I double dare you - to find an MSM outlet that performs investigative analysis at the level of the top blogs. I'm not even going to bother to mention who those blogs are (hint, hint), but just want to throw the challenge out there as I show how PNC may have possibly pulled the wool over the collective media, sell side and market's eyes.

Just a few hours ago, I posted my review of PNC's 3rd quarter earnings for 2009 (please look here to see the media, sell side brokerage and equity market's accolades for said results as well as my opinion -For those that didn't notice - Reggie Middleton on PNCl Q3-09 Results). In that review, I actually gave management kudos what appeared to be operational excellence. While typing the review and pondering the data trends, that annoying thing called common sense kept nagging me. I thought to myself, how can their 90 day late loans and charge offs trend downwards after just buying one of the largest junk loan manufacturers in the country amid near record (and rising) unemployment? Even more to the point, why the hell didn't anyone else press this point? Well, I asked my analytical team to dig in a little deeper, and it didn't take long to come up with an answer...

 

PNC has reported strong accounting earnings for Q3-09 and lower charge-offs as well as lower 90 day lates. The press and the blogs were all over it as a news search in Google reveals:

PNC Financial Services profit jumps 88% - MarketWatch PNC Financial Services Group (NYSE:PNC) said that its third-quarter net profit jumped to $467 million, or $1.00 a share, ...

The sell side jumps on the bandwagon as well... Wells Fargo Upgrades PNC Financial Services Group (PNC) to Outperform; Raises ... StreetInsider.com (subscription)

As a result their share jumped more than 10%.

But, and there is always a but, if we look at the bigger picture things really don't look so rosy...

As a matter of fact, if anyone really bothered to look at the numbers offered (not even the real 10Q numbers, but the numbers offered in the conference call), one would realize that there was no real improvement in asset quality, despite lower charge-offs. As a matter of fact, asset quality AND loan quality got worse, not better - both quarter over quarter and year over year!!! This was the crux of the share price collapse in PNC to begin with. What the hell is wrong with those charged with analyzing these companies??? 

You know, I happen to really, really appreciate the blogoshpere. There are a select handful of blogs that offer unique, insightful and very difficult to come by expertise, opinion and commentary. Much more so than the mainstream media and even more so than the more specialized media. Despite this, there are certain components of the MSM and corporate America that still do not respect the blogs. Now, why is that? Well, I dare you - no, I double dare you - to find an MSM outlet that performs investigative analysis at the level of the top blogs. I'm not even going to bother to mention who those blogs are (hint, hint), but just want to throw the challenge out there as I show how PNC may have possibly pulled the wool over the collective media, sell side and market's eyes.

Just a few hours ago, I posted my review of PNC's 3rd quarter earnings for 2009 (please look here to see the media, sell side brokerage and equity market's accolades for said results as well as my opinion -For those that didn't notice - Reggie Middleton on PNCl Q3-09 Results). In that review, I actually gave management kudos what appeared to be operational excellence. While typing the review and pondering the data trends, that annoying thing called common sense kept nagging me. I thought to myself, how can their 90 day late loans and charge offs trend downwards after just buying one of the largest junk loan manufacturers in the country amid near record (and rising) unemployment? Even more to the point, why the hell didn't anyone else press this point? Well, I asked my analytical team to dig in a little deeper, and it didn't take long to come up with an answer...

 

I, Reggie Middleton, challenge the mainstream media to think independently. I challenge them to dig down, past the sterilized, politically correct soundbites proffered by popular corporate management, you know - the "in crowd". I challenge the MSM to pull out a calculator, run through the reported numbers, and actually ascertain if what is being proferred by managment actually correlates with the numbers offered to the regulatory agencies. I know some of the finance stuff can get arcane, but their are many objective parties to turn to for assistance. Unfortunately, they are very rarely consulted. I see the favored names in the media, but rarely do I see objective opinion. 

Below is a snippet of headlines that I pulled from a Google news search for the phrase JP Morgan.

• msnbc.com - ‎The market's expectations for bank earnings increased after JPMorgan set a high bar Wednesday with a surprisingly strong profit that helped propel the Dow ...
• JPMorgan scores big in latest quarter CNNMoney.com
• JPMorgan Chase Reports Strong Profit of $3.6 Billion New York Times - ‎Oct 14, 2009‎: A year after the financial system was brought to its knees, a resurgent JPMorgan Chase reported a second consecutive quarter of surprisingly ...
• JPMorgan profits lift Dow past 10000 Financial Times Two Reasons the Dow's Rally to 10000 Will Keep Moving Ahead‎ - A blowout third quarter for jpmorgan Chase & Co. (NYSE: JPM) sent its shares and more than 600 other stocks 52-week highs. jpmorgan delivered its strongest ...

Keep these newsbites in mind as I go over what I gathered from JP Morgan's latest results.

JP Morgan - 3Q09 Results and Outlook

Our modelled results were pretty much on point with JP Morgan's actual Q309 reported results - see

• JPM Public Excerpt of Forensic Analysis Subscription (free)
• JPM Report (092209) Final - Professional (subscription)
  
• JPM Forensic Report (092209) Final- Retail (subscription).
  

The tough economic environment is still gripping the traditional banking operations of US banks and JP Morgan's 3Q09 fail to provide light at the end of the tunnel. As a matter of fact, if is arguable that for those that do perceive a light, it is that of a freight train coming to run over the observer. The credit deterioration impact on JP Morgan, however, has been moderated by the gains from trading revenues which provided more than adequate cushion to absorb the high credit losses from the traditional banking operations.

The major support for JP Morgan came from increase in revenues from principal transactions (including trading revenues of investment banking and corporate/private equity division) which led non-interest revenue to increase to $13.8 billion in 3Q09 from $12.9 billion in 2Q09 and $5.7 billion in 3Q08. In 3Q09, non interest revenues accounted for 52.2% of the total net revenues against 50.6% in 2Q09 and 39.0% in 3Q08. 

I, Reggie Middleton, challenge the mainstream media to think independently. I challenge them to dig down, past the sterilized, politically correct soundbites proffered by popular corporate management, you know - the "in crowd". I challenge the MSM to pull out a calculator, run through the reported numbers, and actually ascertain if what is being proferred by managment actually correlates with the numbers offered to the regulatory agencies. I know some of the finance stuff can get arcane, but their are many objective parties to turn to for assistance. Unfortunately, they are very rarely consulted. I see the favored names in the media, but rarely do I see objective opinion. 

Below is a snippet of headlines that I pulled from a Google news search for the phrase JP Morgan.

• msnbc.com - ‎The market's expectations for bank earnings increased after JPMorgan set a high bar Wednesday with a surprisingly strong profit that helped propel the Dow ...
• JPMorgan scores big in latest quarter CNNMoney.com
• JPMorgan Chase Reports Strong Profit of $3.6 Billion New York Times - ‎Oct 14, 2009‎: A year after the financial system was brought to its knees, a resurgent JPMorgan Chase reported a second consecutive quarter of surprisingly ...
• JPMorgan profits lift Dow past 10000 Financial Times Two Reasons the Dow's Rally to 10000 Will Keep Moving Ahead‎ - A blowout third quarter for jpmorgan Chase & Co. (NYSE: JPM) sent its shares and more than 600 other stocks 52-week highs. jpmorgan delivered its strongest ...

Keep these newsbites in mind as I go over what I gathered from JP Morgan's latest results.

JP Morgan - 3Q09 Results and Outlook

Our modelled results were pretty much on point with JP Morgan's actual Q309 reported results - see

• JPM Public Excerpt of Forensic Analysis Subscription (free)
• JPM Report (092209) Final - Professional (subscription)
  
• JPM Forensic Report (092209) Final- Retail (subscription).
  

The tough economic environment is still gripping the traditional banking operations of US banks and JP Morgan's 3Q09 fail to provide light at the end of the tunnel. As a matter of fact, if is arguable that for those that do perceive a light, it is that of a freight train coming to run over the observer. The credit deterioration impact on JP Morgan, however, has been moderated by the gains from trading revenues which provided more than adequate cushion to absorb the high credit losses from the traditional banking operations.

The major support for JP Morgan came from increase in revenues from principal transactions (including trading revenues of investment banking and corporate/private equity division) which led non-interest revenue to increase to $13.8 billion in 3Q09 from $12.9 billion in 2Q09 and $5.7 billion in 3Q08. In 3Q09, non interest revenues accounted for 52.2% of the total net revenues against 50.6% in 2Q09 and 39.0% in 3Q08. 

For those of you who don't follow me regularly, I find it a travesty that banks insured by taxpayer dollars (ultimately) are allowed to take the risks that they do to chase earnings, then get to keep the profits as we indemnify the losses. This blatant risk taking paid off for Goldman this quarter (well, sort of, unless you actually take the risk into consideration when tabulating profit - risk that was incompletely reported, see The Goldman conspiracy theory is now no longer a theory). It also appeared to pull JP Morgan's fat out of the fire as well. The caveat is that these companies have big, rapidly deteriorating credit issues on their balance sheets, and the investing public is being given a smoke and mirrors routine based on strong, but risky and hyper-volatile trading profits to distract them from what caused the greatest recession of all time (thus far, it may get worse) - and that is credit issues. Fat trading profits are transient, these banks balance sheet holes and credit issues aren't. It's just that simple. And what about the banks that don't have trading arms to hide their negative earnings under??? Now, on to the review of credit issues in the JPM conference call...   

Leveraged loans marked 42 cents on the dollar

"First on leverage lending if you recall we started with $43 billion on a pro forma basis with Bear Stearns back in September, 2007 and that's on a notional basis. Now we carry a remaining amount of market value of $3.3 billion and that's carried at roughly $0.42 on the dollar so those are marked down values for what remains."

Now I'm going to be very quick going through the next three slides so I'm just going to make some common points, so the first point is that obviously when you look at home equity prime and sub prime, you're going to see the charge-offs continue to trend higher versus prior periods and in a couple of cases prime and sub prime we up our future guidance but the second point is that across each of these portfolios, so I just want to say it once, they flow into the early delinquency buckets and the dollar value of loans that are sitting in the early delinquency buckets has started to stabilize [this part of the comment seems to be referring to a very short term observation from which they have drawn a positive conclusion that flies in the face of the longer term trend, marked in bold above] .

Like JP Morgan (Anecdotal observations from the JP Morgan Q2-09 conference call), I have never performed a full forensic analysis of Bank if (pun intended) America, but I have made anecdotal observations in the past. See the list of articles at the end of the post for my ruminations on BAC. For now, let's look at the media reports of thier most recent quarter...

From Reuters:

Chief Executive Kenneth Lewis said tough economic conditions will hurt results into 2010. Soaring credit losses may add to pressure on Lewis as the U.S. Congress and regulators increase their scrutiny of the bank, including its ability to manage risk and its controversial January 1 acquisition of Merrill Lynch & Co.

"Growth in charge-offs and non-performing assets still scares the daylights out of me," said Paul Miller, an analyst at FBR Capital Markets. Ya Damn Skippy!

Bank of America set aside $13.38 billion for bad loans for a second straight quarter, and net charge-offs totaled $8.7 billion, up 25 percent from the prior three-month period.

ONE-TIME GAIN HELPS RESULTS

Second-quarter net income applicable to common shareholders fell 25 percent to $2.42 billion, or 33 cents per share, from $3.22 billion, or 72 cents, a year earlier.

Before preferred stock dividends in both periods, profit fell 5 percent to $3.22 billion. Net revenue on a taxable equivalent basis rose 60 percent to $33.09 billion.