Let the Earnings (and Not Losses) Begin
Tomorrow marks the official start of the 1Q10 earnings season for banking with JPM’s release of financial performance at 7 a.m. ET. The eye of Wall Street appears to be squarely fixed on credit performance, although I am not fully sure why.
Bloomberg reports:
Charge-offs from consumer credit-card and mortgage loans at JPMorgan are expected to be about $8.6 billion in the first quarter, a 10 percent increase from the previous three months, according to Credit Suisse analysts led by Moshe Orenbuch. “Reserving remains the largest variable to reported earnings,” they wrote in an April 8 research note to clients.
But Bloomberg did a survey of 21 Wall Street analysts and found that JPM is likely to post profits of about $2.93 billion, or 64 cents a share, for the first quarter. That compares with net income of $3.28 billion, or 74 cents/share, in the fourth quarter and $2.14 billion, or 40 cents/share, a year earlier. This seems to be the key to me. With this level of profitability, JPM may be able to restore its dividend to “pre-crisis levels.” That would be the ultimate sign that all is well among the nation’s top banks.
Sure, credit performance remains a concern, but as long as profitability is there, the banking model is working its magic again. What a long strange recessionary trip it has been.
After JPM on Thursday, earnings season heats up with BAC on Friday; C on 4/19; BK on 4/20; and then the Super Sunday of bank earnings on April 21: KEY, STI and WFC.
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