commoinsense1211

Analyzing the U.S.'s Four Largest Banks

barring another real estate buble or clean energy buble do you really think these banks will ever be "over-reserved" ?


On Nov 09 10:20 AM Tack wrote:

> The $136B in reserves is a huge wildcard in the equation. Contrary
> to making it difficult to make profits, the reserves, themselves,
> represent the greatest source of potential future earnings.
>
> Assuming the economy continues to improve, at some point it will
> become apparent that the companies are over-reserved, and when that
> happens, reserve reversals will have a far greater impact on earnings
> than other invested capital. This is because when reserves are released,
> the capital, itself, passes back through the income statement in
> addition to being freed up for other more risk-based investments.
>
>
> So, the reserves, themselves, represent potential pure profit, and
> not just an increase in available capital.