As bank earnings begin, a warning from the OCC. (excerpt)
By Daniel at 10 October, 2009, 12:50 am
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“Still, J.P. Morgan has more capital than most of its peers, O’Connor noted. And those rivals likely struggled more in the third quarter.
Citigroup , which reports on Thursday, is expected to lose 21 cents a share in the third quarter, according to the average estimate of 17 analysts polled by Thomson Reuters.
Citigroup had more than $67 billion of credit card loans that weren’t covered by a government guarantee at the end of June, according to KBW analyst David Konrad. Potential losses on these exposures could reach almost $18 billion through the current credit cycle, which Konrad expects will end in the fourth quarter of 2010.
Konrad reckons Citigroup faces total potential losses of more than $124 billion before the cycle ends. The bank has taken $5.7 billion in net charge-offs so far, the analyst pointed out in a note to investors on Oct. 2. He’s forecasting annual losses for Citigroup through 2011.
Bank of America , which reports results on Oct. 16, is forecast to lose 6 cents a share, according to a Thomson Reuters poll of 22 analysts.
Deutsche Bank’s O’Connor expects Bank of America to lose 42 cents a share. The bank had $13.4 billion in loan loss provisions during the second quarter and it could set aside the same amount or slightly less during the third quarter, the analyst said. Reserves could be bolstered by $3.5 billion, down from $3.7 billion in the second quarter, he added.
Bank of America’s credit-card business could be one of the main drags this quarter. Losses in this area could reach 13.5% in the third quarter, up from 11.7% in the second, O’Connor forecast.
Wells Fargo , scheduled to report on Oct. 21, is expected to make 36 cents a share, according to the average forecast of 23 analysts surveyed by Thomson Reuters. That’s down from 57 cents a share in the second quarter.
The bank’s mortgage business will likely generate about $3 billion in revenue during the third quarter, up from $2.5 billion in the second, O’Connor forecast.
However, credit losses will continue to weigh on the San Francisco-based bank. O’Connor sees loan loss provisions rising to $6.2 billion in the third quarter, from $5.1 billion in the second.
Charge-offs may jump 15% to 20%, the analyst added. Although that would be down from a 35% surge during the second quarter.
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Whole article here
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