The Banking and Strategy Initiative

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Bank Earnings Season 2014: Mortgage Originations end the same $47 Bln for Wells Fargo and $23 Bln for JP Morgan in December 2014

We have seen these numbers before as the mortgage markets rebounded in 2013. Again at the end of 2014, banks report similar terrain as refi markets jump 66% in the week ended Jan 09(Friday), 2015 and bring back the banks into a heady game for 2015 with new capital considerations. In line with deposit spread compressions at JP Morgan which reported earlier in New York, Wells Fargo also reported a further deterioration in NIMs to 3.04% as deposits grew faster than credit but managed to push itself over the $1 EPS mark in Q4 on $21 Bln in revenue ( no, not respectable) making substantial inroads into its cost structure but a lot of work yet to be done in 2015 though it has a headstart on JP Morgan in the retail/wealth business especially with Wachovia working out for the bank, its cost structure still the significant other out of control for John Stumpf. The Investment Banking team will probably also look for other wins as the M&A markets remained with Goldman Sachs, Jeffries and others in the year of reckoning and banks in Asia did not really give an inch to rank outsiders from Wall Street/West Coast.

With the earnings call a little late for Wall Street at the end of the year, the attendance for the call will be iffy except for the covering analysts. The bank’s full year EPS is still a patchy $4.10 up just 5% on last year and revenues stuck(stolid) at $84 Bln. The share price was up 14% in 2014, not surprising given its frequent under ranking on Wall Street and will likely continue to post stronger gains on the bourses as long as it keeps its earnings nose up, which seem to be a earnings management challenge for the mostly fund based bank which has had to tamp down on its lucrative fee business as well in 2014.

The bank’s loan portfolio growth of $30 odd Billion is not much different from that of JP Morgan chase for the year but CET-1 has inched up to double digits during 2014 and RoE is a comparable 13.4% on a low EPS. Its standaard banking efficiency  (Income/Expense) is stilla hefty and tiresome 59% not tenable for its more retail supercharged business model ( though with a tangible Wholesale Banking pie)

Net Interest Income for each of the four Quarters has not moved over 2014 and is still $11.2 Bln. Fees and Charges added $10 Bln of which Trust income was nearly $4 bln and Mortgage fees $1.5 Bln. However the bank has Non Interest Expenses growing over the third quarter to $12.6 bln in contrast to a 13% lower score at JP Morgan

Mortgage escrow form $26 Bln of the $1,100 Bln in deposits and dividend on the fat equity base  was up 5 cents to 0.35 cents after a $7.2 Bln spend int he quarter on buybacks matching JP Morgan on the annual spend

Payouts have keeled over to almost 60% this year as the bank tries to establish its superiority post crisis and one has to carefully watch out for the elephant to stumble through the year in 2015

The Earnings Call is already in motion at 10am ET

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This entry was posted on January 14, 2015 by in Uncategorized.

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