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Despite narrowing net interest margins, reported bank profits should still be solid thanks to...

Despite narrowing net interest margins, reported bank profits should still be solid thanks to housing's rebound. Mortgage origination income helps, but the big boost will come from improving credit quality. At 1.66% in Q2, mortgage charge-offs remain nearly triple their 20-year average. Then there's loan reserve releases - mocked by some, they nevertheless are earnings that boost capital (maybe allowing bumps in dividends and share repurchases).
Comments (2)
  • Fin858
    , contributor
    Comments (462) | Send Message
     
    People who think loan loss reserve releases are BS can never be pleased.

     

    Going into the start of a credit downturn they point to loan loss reserves going up and say,"SEE, SEE, credit quality is getting worse, they are reserving. Delinquencies are going up, woe is me!" Of course they count loan loss reserves in how a bank is doing.

     

    But when delinquencies start falling, credit starts to improve and the bank, who over provisioned, starts to release reserves they complain that the bank shouldn't do that.

     

    Can never make them happy...
    27 Sep 2012, 04:46 PM Reply Like
  • motlalepule
    , contributor
    Comment (1) | Send Message
     
    I am a manager at Nedbank.
    28 Sep 2012, 02:51 AM Reply Like
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