Wednesday, January 20, 2010

Bank Earnings Fail To Impress Market

  • Bank of America managed to only lose $194 million in the fourth quarter. Oh, wait a minute, that's only if you exclude the $5 billion or so it cost the largest US lender to repay the government. But a $194 million loss just sounds better, doesn't it? So let's just pretend that BAC never had to hit up the Treasury for a bailout and forget that silly "non-recurring" expense. What's really important is that the bank can return to paying its employees whatever it wants and paying out dividends without any consideration as to whether it can afford to or not.
  • Wells Fargo posted a profit of $2.8 billion, or 8 cents a share, beating expectations of a small loss. Revenues also rose by 1% to $22.7 billion.
  • Meanwhile, Morgan Stanley, the former investment banking powerhouse that is currently a cowering and meek Goldman Sachs wanna-be, missed earnings estimates. Frankly, it's hard to figure out exactly what MS did this quarter given the confusing media reports. The Financial Times claims that the investment bank recorded net income of $1.1 billion but a loss of 93 cents a share including the TARP payment. I like how the earnings are in hard dollars but the loss is in earnings per share. Sounds better that way right? The folks at the WSJ report that MS posted a profit of $617 million or 29 cents a share, but earnings from continuing operations were 14 cents a share. The WSJ conveniently excludes the loss including the TARP repayment (I guess they're bullish?). Meanwhile, Bloomberg gives the only information you need to know, that MS will pay out a whopping 62% of revenues in compensation. What I want to know is this: If you are going to pretend like you are Goldman Sachs and pay GS-style bonuses, shouldn't you at least make money like GS does?

1 comment:

t said...

The FT maths on MS earnings is easy - obviously the share count is negative 1.18bn, then it's simple eps=e/s!