Will JPMorgan Chase call the turn in the banking sector tomorrow morning?
For the next couple of days, at least, Jamie Dimon, CEO at JPMorgan Chase (JPM), is the most important figure in the U.S. financial industry.
JPMorgan Chase reports earnings tomorrow, April 14, before the stock market opens. The consensus among Wall Street analysts is looking for earnings of 60 cents a share for the company’s first quarter. That would be a 50% increase from the 40% earned in the first quarter of 2009.
Wall Street, of course, hopes that JPMorgan Chase beats that forecast. Although Wall Street isn’t especially optimistic that will happen. Earnings estimates have been coming down for the stock for the last three months.
But what Wall Street wants, even more than a one-quarter earnings surprise, is to hear CEO Dimon say that the bank has stopped adding to reserves against bad loans. Second best would be a modest add to reserves and a few words predicting an end to a need to add reserves in the next quarter or two.
That’s because any additions to reserves come straight out of a bank’s earnings. Read more
Bank failures set to peak in 2010, FDIC says.
Yesterday, February 24, the FDIC (Federal Deposit Insurance Corp.) announced that its list of problem banks hit 702, at the end of December. That’s the highest level since 1993.
But, if we’re lucky and the economy doesn’t take a step backward this year, the number of bank failures will peak in 2010, the FDIC said. About 140 banks failed in 2009.
Not all those banks will go under but if they fail at recent rates and the average 23% loss rate on assets (since 2007) holds up, the FDIC is looking at having to absorb about $92 billion in losses on the $403 billion in assets at the 703 banks on its problem list between now and 2013, the FDIC projects. The FDIC currently has $66 billion in cash and liquid securities on hand. The agency has recently used special assessments on banks to build up its balances and that’s a likely source of cash if the FDIC needs a top up.
Another special assessment—the FDIC raised $5.6 billion from banks last fall—would take another bite out of banking industry profits. According to Keefe, Bruyette & Woods, the banking industry as a whole showed a profit of just $914 million for the fourth quarter of 2009.
Which highlights something very interesting about the FDIC list. Read more
