Chillin' out till it needs to be funded
One instantly thinks up exposure to Europe’s credit markets when one thinks of Wall Street trading this year too and it seems Goldman Sachs has again stepped in it and Q2 earnings estimates are rapidly being downgraded this quarter. For a Wall street bank that was smorose at having one losing trading Day in Q1 it is likely to be a tough impact on earnings as Q2 seems to have its more than average share of bad days for traders alrteady in position and this time most were not. may’ sslide was apparent to most though but the whipsaws in Commodities and the failure of the promise of the European Credit Markets seemingly will hit bank prospects again in a year when its earnings are expected to climb back to $10-$15 levels from an abysmal $4.4 in earnings for 2011.
Q2 is likely to give a $4 in earnings for JP Morgan unless they book more of European Credit losses as banks squeeze JP Morgan positions after the disclosure last week in tru e retaliation at what JP Morgan does excel at doing to maximise its earnings potential in credit underwriting and direct trading
However the spate of downgrades could likely be influenced by Moodys’ downrating of the banks that would make them add $2.2 bln to collateral balances if they lose two notches at both JP Morgan and Goldman Sachs
Both banks increased their Dividends and buyback in the last Capital plan filed with the Fed and the Street was looking to a happy barbecue fight between the two stalwarts of the street which seems to have dissipated with the burger meat for the fight audience charred beyond repair in the recent down move
Goldman Sachs is still waiting for the final jury on how much of hedge fund Capital and non commercial banking units it can hold while being part of the Fed window operations and is not unduly concrened about a bad 2012 as it consolidates on new fronts in Europe and Asia in the year ahead. The bank reported $2.11 B in earnings in Q1 for a big EPS jump of $3.92 though new rules meant less Capital at Risk and even as the bank managed even better solvency than last year its trading profits plunged
Trading revenue at JP Morgan was $4.66 B and even Citi was able to record a larger FICC income of $3.65 B when Goldman recorded $3.46 B in Trading revenue in 59 trading days in Q1 Big banks are also lobbying against the introduction of inter bank Capital limits in Solvency counts in the new edition of the Dodd Frank rules originally due in July but already postponed for the most part to 2014 for implementation
Both banks will increase the RoE measure performance in Q2 irrespective of pressures on trading in the most likely scenario with an original estimate of close to $3 per share in EPS and $4 (JP Morgan) from Q1’s 12% for both the banks.