Q3 2013 Earnings\Financials: The Party is Over
It’s once again earnings season and a great deal of attention will be focused on financials. Over the past three months, the equity market values of most of the largest universal banks have traded off as investors have started to appreciate that the party is ending in terms of new mortgage originations driven by refinance transactions. As I noted in the last post, the guidance from all of the big banks is decidedly negative for Q3 because of the prospective decline in revenue and transaction volumes in mortgages.
While refinance transactions are falling rapidly, mortgage loan purchases volumes are not growing nearly enough to make up for the drop in overall volumes. The chart below shows the total loan originations, refinance and purchase volumes for all lenders from the Mortgage Bankers Association through Q1 2013:
So when we actually start the Q3 earnings cycle for financials, watch for the word “surprise” in a lot of news reports and analyst opinions. Nobody seems to want to take notice of the very public guidance coming from some of the largest names in the banking complex because of what it implies for housing. But just to show you that God has a sense of humor; Bank of America and Citi have actually outperformed their asset peers in the TBTFgroup over the last three months. Hey, that’s what we need, an index comprised of TBTF banks. Be a useful surrogate for the credit quality of the United States.
See you at Americatyst 2013 in Austin TX next week.
Barclays Is Shutting Down Its Wealth Management Businesses In 130 Countries
(Reuters) – Barclays Plc <BARC.L> will stop offering wealth management services in about 130 countries by 2016 and cut jobs in the unit as part of an effort to rein in costs and boost profit.
Read more: http://www.businessinsider.com/barclays-wealth-management-services-closures-2013-9#ixzz2g04MmUbA
Piling On The JCPain: Citi Lowers JCP Target To $7, Questions “Adequate Cash For 2014/15″, Sees $1/Share Floor
… it is the turn of Citi’s Deborah Weinswig which after reviewing its JCPenney cash burn analysis, goes for the jugular with phrases such as “We think adequate cash for 2014/2015 is in question”, “The turnaround is taking longer than we anticipated, and we are concerned about a softening macro environment combined with deteriorating vendor relationships”, and of course “We maintain our EPS ests. but are lowering our target price to $7, down from $11 prev., based on an EV/Sales valuation methodology using our 2015 sales estimate.” And it gets worse: “Where’s The Floor? — As a supplement to our EV/Sales valuation methodology, we have conducted a basic liquidation valuation, yielding $324M total value, or $1/share.” Well, as long as there is a “floor”…
Forget Recovery: This Is What Total European Monetary Collapse Looks Like
Presented without commentary (if confused – wink wink Mario Draghi - Ray Dalio will explain).
Source: Goldman, ECB
This is how ICAP manipulated Libor rates.