Wednesday, July 14, 2010

"Market slump expected to dent profits at big banks" (BAC; C; JPM; WFC)

Yeah, yeah. We know.*
From the AP:
The bank industry's earnings winning streak may be over.
A terrible spring in the financial markets is expected to leave the nation's big banks with second-quarter earnings that fall short of their stellar results from the first three months of the year. That's bad news for companies that relied on trading profits to mask a still-miserable banking climate with high losses from failed loans and low demand for credit.

Banks begin their second-quarter reports Thursday, when JPMorgan Chase & Co. issues its results. But there may be problems in the coming quarters as well. A number of unknowns are weighing on full-year earning projections and the stocks of big names like JPMorgan, Goldman Sachs and Morgan Stanley. Among the biggest wild cards: how banks will be affected by the financial regulatory overhaul that's awaiting congressional approval. Fears of a "double dip" recession and Europe's debt crisis have added to the gloomy outlook.

The news isn't all bad, though. Smaller banks that don't bet heavily in the financial markets, including State Street Corp. and Fifth Third Bancorp, are expected to post good-to-strong results for the April-June period.
Citigroup Inc. and Bank of America Corp. report earnings Friday, followed by Goldman Sachs Group, Morgan Stanley and Wells Fargo & Co. next week. All six are expected to post profits. Yet nobody predicts a repeat of the first quarter, when Goldman, Bank of America, Citigroup and JPMorgan were models of perfection, literally: All four went without a single day of trading losses.

During the second quarter, worries over debt problems in Europe unnerved investors and sent stocks and commodities sliding. The Standard & Poor's 500 index fell nearly 12 percent during a three-month period of chaotic market swings best illustrated by the historic May 6 "flash crash." On that day, the Dow Jones industrial average fell to a loss of 1,000 points before recovering to close down 347.
"It was a very, very bad trading quarter," banking analyst Nancy Bush of NAB Research said. "I hope everyone has gotten the message.">>>MORE
*In "Citigroup: Breakout!: "Buy Bullish Citigroup Options Before Earnings, JPMorgan Says" (C)"
we reiterated:
Two words of warning. First, from yesterday's "Citigroup Inc. Stock Poised For Breakout" (C):

Back in June we posted "Citigroup Trapped by Moving Averages As Option Speculators Pour Money In (C) with the stock at $3.95:
...The company reports earnings on July 16, which is also an options expiration.
Although the prior quarter's $4.4 Bil probably won't be repeated because the $0.15/share had a big chunk of trading gains, expect the company to use similar verbiage:
"Loan losses coming down with growth of top-line revenue speaks to the overall recovery,"...
They reported on April 19, the Monday after op-ex. 
...There is reason to believe that the Treasury has an SEC opinion to the effect they shouldn't sell in the window immediately preceeding earnings, in which case we'd have a mystery/history set-up.
At least that's what happened last quarter....