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Category Archives: Banking

ECB asks DB about winding down

Arguably the most important bank in Europe is Deutsche Bank. And yet it continues to struggle with the worst price to book of any systemically important financial institution. Over the weekend the ECB asked it to submit plans about how it would wind down its investment bank. FT article here.  Hmm. Gone are the days when the ECB & EBA were made laughing stocks […] Read the rest of this entry »

The CECL Rush. What you don’t know.

With Deutsche Bank stock being pummeled this morning (down 6%, with a price to book of 0.39!), I suspect there are going to be some busy risk management folks today).      If you are in the business of delivering products/solutions/services to help banks and credit unions understand, quantify, and manage risk, congratulations. The next three years are going to be some of the […] Read the rest of this entry »

Go Neel Go!

For months now Mr. Kashkari (Minneapolis Fed Prez) has been diligently attempting to bring everyone’s attention to the fact the capital structure /creditor rules for big banks are a fallacy. When big banks see their balance sheets under duress and a bank flirts with solvency, you cannot apply standard re-structuring/ re-capitalization because it would involve applying a haircut (loss)  to bond holders. That was […] Read the rest of this entry »

When bank stress tests will get stress tested. Why you should care.

If you are a U.S. bank CEO, CFO, CRO, CTO, you are going to be interested in this post. If you’re not, read this anyway because you’re going to learn something that will impact how you manage your personal investment portfolio over the next couple years.  (S&P500 at 2556 as I write this on October 13 2017)  The next two years will be a […] Read the rest of this entry »

Financialization: banks gobbling up the U.S. economy and making it riskier.

This is a chart showing the asset base of U.S. commercial banks and real GDP from 1972 to Q1 this year. Looks a little troublesome no? Let me make it easier for you. This graph is the quotient of the blue line in the chart above (bank assets) divided by the red line above (real GDP). Worried yet? You should be. This graph clearly […] Read the rest of this entry »

‘Big Short’ Steve Eisman says financial system is safe

This morning’s FT has a good article about Steve Eisman’s view on the global financial system. Eisman -who made a $B shorting the U.S. real estate sector in 2007-2009- was portrayed by Steve Carell as the main character in the movie “The Big Short”. Here’s where I agree: The financial system is “safer than it has been in decades”. Well, I don’t know about decades, but […] Read the rest of this entry »

JPM wants relief on bank regs

There’s an excellent and very timely article in the FT today (https://www.ft.com/content/441be482-fdcb-11e6-8d8e-a5e3738f9ae4).  JP Morgan’s CFO is asking for relief from burdensome capital requirements.   Banking is a pro-cyclical business — when the economy is good banks do very well  / when the economy is soft banks do poorly. Banking is a levered bet on interest rate spreads (among other things). So when the economy […] Read the rest of this entry »

When no one believes your balance sheet

When no one believes the asset valuations on your balance sheet, you get a stock price reflective of this. Deutsche Bank has a price to book of  0.41 Citi has a price to book of 0.73 Bank of America has a price to book of 0.92 When you are believed, you get a stock price more like this: Wells Fargo price to book 1.46 […] Read the rest of this entry »

Banks prepping for a storm

This chart shows that bank lending tends to stall in recessions. A closer look…   And now the most recent data…. Notice the dip in early 2011? That was the last time loan growth contracted meaningfully. It was also a period when GDP growth fell into contraction. Q1 2017 will not post a negative GDP growth print. ECRI’s WLI is far too high for […] Read the rest of this entry »

More bank earnings: Wells Fargo

Wells Fargo announced Q2 earnings results. Not at all surprisingly, they beat sand-bagged earnings estimates. Revenue was $21.4B  – essentially flat with the same quarter last year. This beat the consensus $21.2B estimate (barely). Earnings was $5.5B — up 19% from the same quarter last year. This translates to $0.98/share (up from $0.82/share last year). Consensus was $0.93/share. So what’s not to like? $1.0B […] Read the rest of this entry »