Chillin' out till it needs to be funded
A shock for the messiahs, a shock for the game
When commentary about coming first half results for Big Banks started appearing in mid June the notes were definitely sombre and affected. Apart from the contribution of trading expected to tick down from the low 23% in Q1 , one expected lower costs to only slightly provide succour to the dull season as estimates were cut in half and the BofA settlement even managed to bring down the house,
dragging S&P 500 earnings to 12.7% growth year on year for Q2. Without BofA, this number would have been 14%.
The JP Morgan commentary on Citi and other banks on June 23 was highlighted in WSJ for the 20% fall already done in BofA and the potential similarily in Citi to track upward on good news. Already, deal numbers show a fat $4 bln and $3 bln for J P Morgan and Morgan Stanley insuring them for a good income this quarter. Citi also is expected to perform much better now that its international exposure has been recognised as a distinct advantage
Thursday sees J P Morgan trying to beat a low $1.21 street estimate so the amount it beats the street may even be 35-40c more than this early number by analysts. Citi would be close behind and then Goldman Sachs, Wells Fargo, Morgan Stanley and the assert giants Blackrock and Blackstone will play out. BofA still looks shaky though and Goldman SAchs is getting serious about job cuts, but as late as May, JP Morgan was hiring. $2 a share for Goldman Sachs (Citi estimate) should still be a tough ask, given its highlighted dependence on trading as Client business is likely to be in the low double digits for the quarter compared to high teens earlier
Capital Markets and Trading income will be dull and not a lot is expected from the $120 bln Card portfolio target for JPMC or its settlements of $220 mln and $153 million for its mortgage securities it agreed to pay SEC in the two settlements done in 2011. the $5 bln Q1 Fixed Income and Commodities income was likely an aberration but with fat deal revenues the bottomline will remain good esp with loan loss reserves being reduced going into 2012
With $20.4 bln in added provisions the BofA loss would be a lasting statement for the entire industry as well. Mike Cavanagh and Jamie Dimon, however could yet turn it around for the industry as GS does a Repo 105 of its trading talent in the quarter..Anshu getting a chair at Deutsche probably challenges him more to get that elusive new credit business in the Americas