Archive for the ‘bank earnings’ Category
Posted by Larry Doyle on November 25th, 2013 9:38 AM |
$82 billion.
What does that figure represent? The subsidy (aka competitive advantage) that accrues to our major banking institutions from favorable borrowing rates given their status as ‘too big to fail.’
Those tens of billions of dollars truly represent a nice, big head start for a handful of banks, and a withering assault on the precepts of free market capitalism for the rest of us.
As if $82 billion were not enough of a subsidy, let’s not forget that these banks pay you, as a depositor, virtually zero interest for the ‘privilege’ of holding your money there. Well, that may be changing. How so? How would you like to actually pay interest to the banks in order to keep your money in their institutions? Really? No way?
Yes way. (more…)
Tags: banking oligopoly, banks, charging people to hold money on deposit, Federal Reserve tapering, might banks charge depositors, negative interest rates on deposits, quantitative easing tapering, similarities between the Mafia and Wall Street, subsidy of too big to fail, tapering of QE, too big to fail banks, too big to fail subsidy, Wall Street and The Godfather similarities, Wall Street oligopoly, what is an oligopoly, will banks charge depositors, will it cost depositors to hold money at banks
Posted in bank earnings, Bank Failure, Bank of America, Bank Stress Test, Banking Committee Meeting, Banking Institutions, General, Wall Street, Wall Street Washington Incest | 4 Comments »
Posted by Larry Doyle on September 12th, 2013 9:09 AM |
Do you think there is a reason why bank balance sheets are so convoluted and opaque? Of course there is.
The lack of meaningful transparency allows the banks to continue to employ excessive degrees of leverage across a widely disparate array of businesses and with a paucity of competition all in the hope of generating outsized returns. But who do you think bears the ultimate risk?
They pursue these paths with the support of the Federal Reserve’s zero interest rate policy and a regulatory system that belies meaningful oversight despite those who might want us to believe that Dodd-Frank brought reform to the system.
Former FDIC chair Sheila Bair does not leave much to interpretation on these topics. (more…)
Tags: bank leverage, banks are still too leveraged, Federal Reserve, leverage on Wall Street, regulation on Wall Street, Sheila Bair Bloomberg interview, Sheila Bair interview on Bloomberg, Wall Street, Wall Street 5 years later, Wall Street regulation, Wall Street what has changed
Posted in bank earnings, Bank Failure, Bank Stress Test, Banking Institutions, General, regulation, regulatory capture | 3 Comments »
Posted by Larry Doyle on June 13th, 2011 9:03 AM |
What did the Lord say to Noah?
The same thing that Bank of America CEO Brian Moynihan might now be saying to his shareholders. That is, ‘how long can you tread water?’
Bank of America’s stock is down approximately 25% on the year and close to 35% over the last twelve months. While it has doubled from the Armageddon lows seen in 2008, the stock has fully retraced any moves higher since early 2009. (The graph of Bank of America below is sourced from Market Watch and covers the last three years).
What gives? Will Bank of America need to raise more capital? Will it need another lifeline from Uncle Sam?
(more…)
Tags: Adam and Eve, BAC, BAC banking, Bank of America, Bank og America mortgage operations, bank reserves, banking losses, Bert Ely bank analyst, BofA management, Brian Moynihan Bank of America CEO, Concern Rises Over U.S> Mortgage Defaults FT June 13 2011, consumer banking, delinquncies defaults and foreclosures on mortgages es and, extend and pretend, Financial Times June 13 2011, garden of Eden, health of Bank of America, how long can you tread water, Larry Doyle, Laurie Goodman of Amherst, more losses at BofA, OCC data on mortgage performance, OCC monthly mortgage report, performance of Bank of America, performance of mortgages June 2011, performance of private label mortgages, proxy for American housing, Regions Financial Probes Executives June 2011, reserves against bank losses, Sanford bernstein Projects $27 Billion Loss for BAC, Sanford C. Bernstein, Sense on Cents, stock of Bank of America, tendency not to report bad news, uncertainty in Bank of America stock, will BAC need another bailout, will BofA need another bailout, WSanofrd C. Bernstein analyst John E. McDonald
Posted in bank earnings, Bank of America, General | 12 Comments »
Posted by Larry Doyle on November 10th, 2009 4:28 PM |
Having broached expectant difficulties in the Federal Home Loan Bank system last spring, I try to keep a close eye out for news of note on this largely unknown – but critically important – system of banks. To a large extent, the FHLBs have been flying under the radar despite some serious problems within their investment portfolios and loan books.
High five to KD for pointing out that the folks at FHLB-Seattle probably are not getting much sleep these days. Why is that? Insufficient capital will do it to you every time. As the American Banker offers, FHLB Seattle Still “Undercapitalized,” Regulator Says:
The Federal Housing Finance Agency said late Friday that the Federal Home Loan Bank of Seattle remains “undercapitalized” and will not be allowed to redeem or repurchase stock or pay dividends.
At the end of 2004, as the bank struggled with the size of its mortgage purchase program, it said members who wish to redeem their stock must wait five years before receiving their money.
But with that time period almost up, the Finance Agency said it would not allow the bank to begin redeeming stock, fearing it could lower its capital base. (more…)
Tags: Federal Home Loan Banks, Federal Housing Finance Agency, FHFA, FHFA Acting Director Edward DeMarco, FHLB Seattle, FHLB Seattle mortgage purchase program, FHLB-Seattle Still Undercapitalized, FHLBs, insufficeint capital at FHLB-Seattle, loan demand at FHLB-Seattle, portfolio of FHLB-Seattle
Posted in bank earnings, Bank Failure, Banking Institutions, Federal Home Loan Banks, General, Mortgages | No Comments »
Posted by Larry Doyle on October 1st, 2009 11:38 AM |
Financial chicanery and accounting charades come in all shapes and sizes. From mismarking trading positions on Wall Street to running massive Ponzi schemes and with many other stops along the way, the games people play to accrue false profits and cover real losses are endless. That said, all this artifice ultimately does end as the true value, or lack thereof, of the underlying assets is flushed out. For this very reason, I remain extremely concerned about the economy and overly conservative in my approach to the markets.
While we could debate at length about the necessity and efficacy of the FASB’s relaxation of the mark-to-market accounting for bank assets, ultimately the accounting will not truly matter. Why? The value of the assets on the banks’ balance sheets will find their true level. In the process, the banks will be sufficiently capitalized, or not. My bet is that many more of these banks will not be sufficiently well capitalized. Additionally, do not expect bank examiners and regulators to share this information.
I see clear evidence of this exact scenario in reading Bloomberg’s esteemed columnist Jonathan Weil’s commentary, Banks Have Us Flying Blind on Depth of Losses:
There was a stunning omission from the government’s latest list of “problem” banks, which ran to 416 lenders, a 15-year high, as of June 30. One outfit not on the list was Georgian Bank, the second-largest Atlanta-based bank, which supposedly had plenty of capital.
It failed last week.
Georgian’s clean-up will be unusually costly. The book value of Georgian’s assets was $2 billion as of July 24, about the same as the bank’s deposit liabilities, according to a Federal Deposit Insurance Corp. press release. The FDIC estimates the collapse will cost its insurance fund $892 million, or 45 percent of the bank’s assets. That percentage was almost double the average for this year’s 95 U.S. bank failures, and it was the highest among the 10 largest ones.
Do you think Georgian Bank was a special situation that somehow slipped past the accountants, examiners, and regulators? If you believe that, I have some AAA sub-prime CDOs for you that really look like good value.
What do we learn with the failure of Georgian? As Weil attests:
The cost of Georgian’s failure confirms that the bank’s asset values were too optimistic. It also helps explain why the FDIC, led by Chairman Sheila Bair, is resorting to extraordinary measures to replenish its battered insurance fund.
How many other ‘Georgians’ are out there? Plenty. The material difference amidst the banking system is the composition of the loan and investment portfolios of different institutions. Despite the fact that the FASB, pressured by Congress and Wall Street, has allowed banks to utilize chicanery and charades to cloud our view, fortunately we have journalists like Jonathan Weil to provide some clarity.
Might we be able to get Mr. Weil to shed some light on “Analyst Exposes Wells Fargo Balance Sheet Charade”?
LD
Tags: accounting frauds, bank accounting, Bank capital, bank regulators and bank examiners, concerns about the economy, failure of Gergian bank in Atlanta, false profits, FASB's relaxation of the mark to market, FDIC, FDIC insurance fund, financial artifice, financial chicanery, Jonathan Weil writes Banks Have Us Flying Blind on Depth of Losses, mismarking trading positions, Ponzi schemes, real losses, value of bank assets, Wells Fargo Balance Sheet, will banks be sufficently well capitalized
Posted in accounting, bank earnings, Bank Failure, FASB, FDIC, financial frauds, Forensic Accounting, General, Mark-to-Market, markets, Mortgage Crisis, Wall Street | 2 Comments »
Posted by Larry Doyle on July 14th, 2009 8:09 AM |
A number of major financial institutions are reporting 2nd quarter earnings this week. Actually, to say these institutions are truly reporting earnings would be a misnomer. To a large extent, these institutions are releasing managed earnings reports. What does that mean? Let’s navigate this ever important sector of our economic landscape.
In simplistic fashion, earnings are revenues less expenses. While financial analysts may want us to take reported earnings on face value, there is a lot more to it than that. What are the quality of the earnings? Are revenues increasing or decreasing? Are expenses increasing or decreasing? Are net margins of profitability increasing or decreasing? Are earnings a function of a growth in revenues or more a reduction in expenses?
In regard to a financial institution’s earnings, the greatest expense is typically compensation and benefits. On Wall Street, the expense associated with personnel usually runs between 50-55% of overall expenses.
On the revenue side of the ledger, earnings are broken down by division. How much revenue is produced from fee-generating business units and is repeatable versus how much is generated from volatile trading businesses and is thus more risky. Fee generating revenue is considered to be of higher quality. As such, the market attaches a higher multiple to the earnings from those business units.
In my opinion, the most opaque component of earnings and income statements revolves around valuations of assets held on the financial institution’s books. This component of an earnings statement is truly where the financial wizards on Wall Street get most creative. The assets to which I refer are:
1. Securities positions, that is, the variety of different bonds, stocks, and derivatives held by the institutions. While plenty of these assets are very liquid, easily evaluated, and thus easily marked, others are much less so. For a wealth of toxic assets (different types of mortgage assets, CDOs, and the like), these institutions were blessed by the FASB (Federal Accounting Standards Board) to mark them at levels which they deem appropriate versus where the assets may actually be trading in the marketplace. In the process, these institutions are sitting on hundreds of billions of embedded, yet unrealized, losses. How and when may those losses be recognized? When the underlying loans backing these securities default. Let’s move to that aspect of ‘managed earnings.’ (more…)
Tags: 2nd quarter bank earnings, are banks assets marked appropriately, are banks reserving enough against bad loans, bank earnings are managed, bank reserves against bad loans, banks are front end loading earnings, banks have underreserved, can earnings reports be trusted, components of earnings reports for banks, earnings quality for banks, embedded losses on banks books, fee generating businesses for banks, financial charade by banks, financial earnings reports more managed than real, how are earnings reports generated, how are reserves set aside by banks, how are securities marked on a banks books, how do banks make money, how do banks value assets on books, levels of defaults on bank loans, levels of delinquencies on bank loans, levels of foreclosures on bank loans, managed earnings versus real earnings, multiples attached to business units of banks, quality of bank earnings, relaxation of mark to market, should we take bank earnings on face value, trading revenue businesses for banks, what do bank earnings cover, what is a multiple for earnings, what is behind bank earnings, what level of reserves do banks set aside, when are embedded losses recognized by banks, where do banks make money
Posted in bank earnings, Banking Institutions, General | No Comments »
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