Drop of loan may reduce the income of banks

April 12, 2011, 12: 15 pm EDT by Dakin Campbell

April 12 (Bloomberg)--U.S. banks such as JPMorgan Chase & Co. and Bank of America Corp. may report low income for the first quarter after the loans made by the industry declined in almost all categories.

Leases and loans of the Bank fell 87.4 billion of 6.97 trillions of dollars of the end of March 30, 2010, or 1.3%, according to Federal Reserve data. Deposits in U.S. banks have increased the same percentage of 7,97 trillions of dollars, showing households and businesses are always accumulation of cash instead of borrowing, analysts said. "While its loans growth tends to be seasonally weak first quarter, this neighbourhood is followed worse than seasonality,"analysts from Barclays Capital Inc. led by Jason Goldberg wrote in a report April 8." "We fear the companies were disappointed."Investors will get their first look at the results of the quarter tomorrow when JPMorgan based in New York, ranked second by the United States assets, is scheduled for the report. The largest lender, based in Charlotte, Bank of America North Carolina, will report to April 15, followed by next week based in New York Citigroup Inc., based in San Francisco Wells Fargo & Co., ranked third and fourth by assets.The benefits may have increased even with the decline in income that canceled less than lenders Fund to cover losses on loans and in some cases discharged from the reserves they have already built, said Matt Burnell, a Wells Fargo Banking Analyst. Price reductions may also help the line from the bottom in a smaller way, said Burnell.Nouvelle RegulationsLack of the loan application is one of the constraints on revenue to banks as exclusive of new regulations limit trade and fresh overdrafts and debit cards. Stocks of Bank towed up 5.3% this year in the standard & poor 500 Index, with index Bank KBW 24-company changed little.While trade in revenue has been credited to reinforce the benefits of last year, lenders still depend on the net interest income, the money made on the loan and securities investment. Representing 46% of Bank of America 2010 revenues and 53% at Wells Fargo. Figure a 50% of JPMorgan and 63% for Citigroup.JPMorgan, led by the Director General Jamie Dimon, 55, may report net adjusted rose 41 per cent in the year-earlier quarter 4.68 billion, according to the median estimate of 14 analysts surveyed by Bloomberg. Income has probably declined 9.5% to $ 25 billion, analysts estimate.Benefit EstimatesBank of America, led by CEO Brian t. Moynihan, 51, can report a decrease of 2.8 per cent of profit to 3.09 billion over a drop of 19 per cent of the income of $ 26.5 billiona survey of Bloomberg 14 analysts. The Bank said investors in January that net interest income declined in the first quarter of the last period of 2010 and level off then "some time in the second."Income may fall 20% to Citigroup, led by the CEO Vikram Pandit, 54 and 1.3% at Wells Fargo, 57, led by John Stumpf survey of Bloomberg. In the first quarter profit may increase by 41% to 3.56 billion to Wells Fargo and refuse of 36 per cent of $ 2.84 billion in Citigroup Bloomberg survey. The spokesman for all four banks refused to comment on.Oppenheimer & Co. Chris Kotowski Analyst believes that banks in its universe of coverage, which includes the four largest, say ready outstanding has decreased by about 1.5%, according to a report of 24 March.Weak points include American consumers, who are cutting the use of the slowdown in home purchases and credit card. Mortgages residential closed end fell 3.3% in the first quarter, while the credit cards and other revolving loans declined by 1.2%, according to the Fed. Consumer and residential mortgage loans account for about 54% of the total defined bank loan, fed with data shows.Commercial LendingSome of the largest banks are still limited by the low budgets or are not replace loans by new when their maturation, analysts from CreditSights Inc. led by David Hendler wrote in a note on 10 April. For example, JPMorgan may reduce as much as $ 10 billion of its portfolio of credit cards in the first quarter and said that his book real estate residential may decline as much as 15 percent annually, written Hendler.Lenders won't much help this time from revenues from investment banking and commerce, which analysts predict can drop fourth straight-year for the quarter. Guy Moszkowski to Bank of America lowered first-quarter earnings estimates the month last to Citigroup and JPMorgan, Goldman Sachs Group Inc. and Morgan Stanley, saying that commercial revenue bounce as much as he expected a low fourth quarter.LendingOne commercial area of force may be ready commercial and industrial, used by companies to buy stocks or to improve technologies and other parties capital-intensive business. Total C & I loans increased to $ 1.25 billion in the week for the week ending March 30, the seventh of the increases in the nine past, fed of emission data. Average balance of loans Wells Fargo advanced 1 percent in the first quarter, fueled by C & I loans, Goldberg said. "Who is likely to continue. the business sector is doing well in General, "said Stephen Stanley, Chief Economist of Pierpont Securities LLC in Stamford, Connecticut and a former economist at the Fed. Demand is not stronger because the Treasury of liquidity held by us companies "limit their appetite" for loans from the Bank, said Stanley.Des companies-financial based in the United States. held 1.89 trillion dollars in liquid assets, including cash, at the end of December, according to the Internal Revenue Service. "This appears to be a brilliant place,"said Burnell at Wells Fargo." For the rest, "still looking ready negative growth."

-With the help of Michael Moore's j. in New York. Editors: Rick Green, William Ahearn

To contact the reporter on this story: Dakin Campbell in San Francisco at dcampbell27@bloomberg.net

To contact the editor responsible for this story: David Scheer in dscheer@bloomberg.net.

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"Too big to fail" banks could expand

By Karen Weise

As legislators debated how for the revision of the financial regulations, their mantra was that, if nothing else, the "too big to fail" era was over. Never taxpayers would save the world's major banks to prevent capsizing the entire financial system. At the time that the Dodd-Frank financial reform act was signed in mid-2010, 10 banks controlled three-quarters of all banking assets, place of 68% in 2006, in part because large banks have dug institutions in difficulty. "Very large, systemically important institutions have been at the heart of the crisis", says David a. Moss, a professor at Harvard Business School.

It is therefore all the more surprising that federal agencies putting reforms into effect are written rules to strengthen the dominant position of the largest banks. The Federal Reserve, for example, issued regulations designed to curb the payments of commission that gave mortgage brokers an incentive to guide owners to risky mortgages, but these rules could make it easier for large banks dominate the mortgage market. During the housing bubble, brokers usually earned by selling high-cost loans, even if the borrowers qualify for lower rates. The rules now require effective loans officials to pay a salary and prohibit commissions related to the loan interest rates. No doubt the regulations are necessary to protect the purchasers of corrupt practices, but the Fed rules could provide a fatal blow to mortgage brokers, who help shop owners for mortgage loans from different lenders. As securities brokers, they earn most of their remuneration by the volume of sales, not wages. Brokers have more fobbed by big retail banks, which are based on branches and building sales force employees, says Guy Cecala, Publisher of commercial paper in mortgage financing.

Large bank even bias is built in the rules proposed by six organizations end of March that would require issuers of mortgage-backed securities to keep 5 percent bonds on their books. The hope is what, by organizing a share of the risk, banks will limit to loans in bad quality. Conservative mortgage - for borrowers with good credit and at least 20% down - would be exempt. Big banks can afford to keep the risk required on their books, while "community banks did not have the necessary means for their balance and ability to raise additional capital which would be necessary", explains Karen M. ThomasHead of relations with the Government for America's independent community bankers. Wells Fargo (WFC), which comes from a quarter of all residential mortgages last year, has lobbied for still more conservative requirements, saying that those with 30% down should be exempted from rules. "That they regard as a competitive advantage to have grand and purses," said Cecala.

Derivatives rules also encourage smaller institutions. The market is already highly concentrated, with the commercial offices of five major actors in the implementation of 96 per cent of swaps by commercial banks. The big players "want to do all they can do to control the market post-Dodd-Frank," said Michael Greenberger, Professor of law at the University of Maryland and a former official of the Commodity Futures Trading Commission. The Act requires that merchants to pledge and treat most derivatives through documentation centres. It is a question open, although if regulators will prevent large banks to control documentation centres. In the fall, the CFTC proposes to leave the dominant players to possess up to 5% of the centres of documentation without any cap on their collective property. The Ministry of Justice, said the absence of an overall limit "not enough will to reduce the risk that primary dealers can control" exchanges and the block of the small players. Rules favouring large banks may be not a problem if regulators are extremely "tough" in the monitoring of the risks that the giant institutions, said Moss of Harvard, but these rules are too yet to win.

The bottom line: The financial reform act, Dodd-Frank was supposed to end "too big to fail", but its implementation could still make the big banks.

Weise is a reporter for Bloomberg Businessweek.

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