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Wednesday, 14 January 2015 00:00

Exactly 4 Years Ago I Declared Big Banks the New Tobacco Industry. Was I Right? Featured

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On January 6, 2011 I penned, "As JP Morgan & Other Banks Legal Costs Spike, Many Should Ask If It Was Not Obvious Years Ago That This Industry May Become The "New" Tobacco Companies". Was I right? Fastforward to January 14th, 2015 and you find "JPM Misses Revenues And EPS Due To Another $1 Billion In Legal Costs", as reported by ZeroHedge, as excerpted:

... a miss on both the top and bottom line, reporting $1.19 in EPS, well below the $1.32 consensus, and just barely above the lower estimate of $1.16. This was a decline from both the previous quarter (by 17 cents) and from a year ago (by 11 cents). Revenues missed as well, with JPM reporting $23.552 billion in top line, a decline of $560 million from a year ago ($1.6 billion lower than Q3), and below the $24.0 billion consensus. And while JPM's latest recurring, non-one time "one-time, non-recurring" charge came as a surprise to most (although how over $30 billion in legal charges can be considered one-time is beyond us), at the same time JPM once again resorted to the oldest trick in the book, taking the benefit of some $704 million in loan loss reserve releases, nearly offsetting the entire negative impact of the legal charge.

Of course, the reported revenue should not be confused with the GAAP revenue, which actually was $1 billion less at $22.5 billion, the lowest quarterly real revenue in over a year!

The miss happened despite JPM repurchasing another $1.5 billion in common stock, leaving $2 billion in buyback capacity for Q1 2015.

The weakness in earnings was widespread, and now that JPM's prop desk is dead and buried, and the bank has to make money the old fashioned way using NIM, the fact that Mortgage Banking Income dropped from both the prior quarter and Q4 2013 will hardly inspire much confidence in the firm. Still the result was better than some had expected - the reason: Total headcount down over 7,500 for the year.

Speaking of net interest margin, that's going to be a challenge. AFter all, we have a market crash to deal with.

Read 3755 times Last modified on Wednesday, 14 January 2015 10:57

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