Though Q1 bank profits looked good at first glance, most of it came in unsustainable ways, and...


Though Q1 bank profits looked good at first glance, most of it came in unsustainable ways, and can't hide a combined 13.3% drop in net revenue at the big six: BAC, JPM, C, WFC, GS, MS. Earnings growth was largely driven by reduced loan-loss provisions, "which the market has largely discounted"; attention has shifted to overall revenue or pre-tax pre-provision net revenue.

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Comments (5)
  • Jason Cawley
    , contributor
    Comments (5459) | Send Message
     
    Actually, lower loan loss provisions can continue to boost earnings for years. They hit such huge levels in the crisis, they can fall by several percent of the loan book per year and still only reach average levels, and another half a point to hit previous full employment, late cycle levels. Several percent of the loan book is a Big Deal (TM). In case everybody just forgot, the only reason the banks were ever in the trouble that sent them to their present low valuations were bad loan losses. If those abate, they are money machines, even without the top lines moving at all.
    26 Apr 2011, 03:13 PM Reply Like
  • Econdoc
    , contributor
    Comments (2938) | Send Message
     
    bingo Jason

     

    banks are where the value is
    26 Apr 2011, 09:14 PM Reply Like
  • tigersam
    , contributor
    Comments (1707) | Send Message
     
    It is getting reflected in stocks.
    26 Apr 2011, 03:27 PM Reply Like
  • bbro
    , contributor
    Comments (10933) | Send Message
     
    PPNR has always been important. It was a key ingredient in the Stress tests doen in 2009. All the majors should eventually trade 5 times their PPNR.
    26 Apr 2011, 03:55 PM Reply Like
  • Junto
    , contributor
    Comments (21) | Send Message
     
    Look at net interest income vs revenues, of course fee income sources should be compared separately. This is more reflective of true earnings potential. Revenues not as applicable as other industries.
    27 Apr 2011, 11:46 PM Reply Like
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