Posted on 04/17/2008 1:38:19 AM PDT by Fred
Investors sometimes get excited by bad news just because it isn't as bad as it could have been.
Wednesday's profit slide at J.P. Morgan Chase & Co. and Wells Fargo & Co. triggered a rally by beleaguered bank stocks. Earnings reports and comments by top executives of the two big U.S. banks included a slew of troubles -- more souring mortgages, write-downs of toxic securities and economic gloom -- but no particularly nasty new surprises for shareholders who have been pummeled by the credit crunch since summer.
It was almost as if Wachovia Corp. hadn't rattled Wall Street two days earlier by slashing its dividend and getting a $7 billion cash infusion to plug its leaky balance sheet -- or as if the rocky bank-earnings season didn't have a long way to go, including Citigroup Inc.'s results Friday.
The forecast for the banking industry has left investors feeling like they are on a seesaw, up one day and down the next. That isn't likely to end anytime soon, judging from the sobering words that came from J.P. Morgan and Wells Fargo yesterday, even as their stock prices were rising.
"Obviously, the worse a recession gets, the worse it gets for us," said James Dimon, chairman and chief executive at J.P. Morgan, the second-largest U.S. bank in stock-market value behind Bank of America Corp. After being hit hard in recent months by rising delinquencies in its $95 billion home-equity portfolio, J.P. Morgan warned its prime-mortgage business is experiencing higher charge-offs as more borrowers fail to repay their loans.
Howard Atkins, Wells Fargo's chief financial officer, said the "prudent assumption is that we haven't hit bottom yet and that things will remain weak in the near term." Loan charge-offs at the fourth-largest U.S. bank, based in San Francisco, were higher in .....
(Excerpt) Read more at online.wsj.com ...
I am beginning to wonder about all these write-downs world wide. I wish someone would add up the value of all the forclosed and likely forclosals and see if the numbers come anywhere close to the gazillions that have already been written down.
A lot of the write-downs represent market value adjustments and reflect the lack of ability to sell securities. It doesn’t always mean that the securities won’t perform as expected through maturity. In other words, there are definitely some paper-only losses included in the numbers you are seeing.
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