The Banking and Strategy Initiative

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2012 Bank Results Preview : Deal revenues, Munis and High Yields or just Commercial lending

After this month’s HSBC results confirmed what JP Morgan showed us at the Investor conference, a likely uptick in Q1 revenues is likely to rely on the return of both conventional retail banking and lending with Auto loans in the lead, and the Commercial Banking lending whether in the Deal arena or otherwise.

Dealmakers had a good pressed start of the year with media backing their comeback after the FB IPO was announced but that is likely no the positive run off in revenues one expects on back of a dismal 2011

Someone like Goldman Sachs would of course report more cost efficiencies while one suspects Citi and Bank of America will be busy with residual balance sheet impact from the housing settlement after BofA renegotiated the settlement to $100k in principal reductions for its own portfolio in the 49 states or at least in California

JP Morgan has interestingly, caught up on not just balance sheet ratios ( which rather , regulators caught up to what JP Morgan was always ready for) but also erstwhile Commodity lions at Goldman Sachs and the rest, with its Commodities desk not caught on either the Euro or the Gold play in early 2012 and in March which were both different except for those just hoarding Euros and saving Gold, i..e the Sovereigns which have taken most of our time this quarter.

Many bank analysts themselves have stepped out to the plate to re rate BofA and Citi after they jumped 58% and 45% earlier in February and the bank stocks are now relatively quieter in the last two weeks

The Custody wars and the impact on FX income may not really disturb banks like JP Morgan and HSBC or even Goldman Sachs that have always hasd a different approach to their custody programs for clients. From the earlier focus on Securities Lending which never really developed outside the London center and a different basis for Treasury pricing of currencies, their FX Income was also not such a big accrual to the bank income The $25 Tln in assets with specialist Custody banks like BNY Mellon and SSGA are however likely impacted by Custody Programs.

Chase of course will also make new inroads in mobile and payments this quarter while the wider industry shows more reliance on Global trade and Transaction banking this quarter, where even intra company transfers for the same customer can be enough for the bank’s survival volumes across Asia, Europe and Americas.

Q1 may not bring it but LatAm and Asia ( Investments of course did not do good for GS again) may become bigger contributors by the end of 2012 for the global franchises, and not because of regulatory arbitrage that can open up after the finalization of Dodd Frank. Card revenues are likely to be good for at least JP Morgan and BofA.






This entry was posted on March 10, 2012 by in Banking, European Sovereign Debt crisis, Financial Markets, US.


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