The Banks' Message

Rating:

For the most part, the big banks have now reported earnings. And there's a lot to digest. But when we're done with today's discussion, I believe we'll have a strong handle on a big opportunity for small cap investors.

So bear with me as we set the stage...

This morning Morgan Stanley (NYSE:MS) reported that it returned to profitability after three consecutive quarterly losses. While the bank reported strong results from its investment banking and growing brokerage businesses, it said real estate investments are still a drag.

Wells Fargo (NYSE:WFC) sang a similar tune. The third-largest U.S. bank by market cap recorded $3.2 billion in Q3 net income, but expects loan losses to rise further, and to peak next year. Their acquisition of Wachovia is not helping matters. Those loan losses rose over 70%.   

We're hearing the same story from nearly all the big American banks, whether they made money or not. "Profits are positive, or at least less negative, but we're still loosing money on bad real estate and consumer loans." This was the news from Bank of America (NYSE:BAC), US Bancorp (NYSE:USB), Citigroup (NYSE:C), and JPMorgan Chase (NYSE:JPM).

No doubt we're all growing weary of the stream of bearish news on the housing front. The Commerce Department said Tuesday that September New Home Construction and New Building Permit applications were lower then expected. Foreclosure filings hit a record high. Another report stated that national median home prices will drop more than 10% by June 2010.

For access to the full article, you must be a registered member - it's FREE.

Already a member? Please log in below