The DJIA’s funeral started today, but the banks and Google can save U.S. stocks

Dow Jones Industrial Average is the main disappointment of the week, but hope remains

In brief: Dow Jones Industrial finishes strong week of the collapse, but investors do not hurry to bury the Dow index.

Dow Jones falls to lowest level ending the week. The DJIA fell from the very beginning of trading, in the middle of the trading session the bulls attempted to save the Dow index, but the Bears crushed index of blue chips. Dow Jones Industrial Average fell to 10,096.16, losing 263.15 points (-2.54%). At the same time, quarterly reporting Bank of America (BAC) as a whole was worse than our expectations, especially in regard to the income of the bank, although we saw a positive EPS surprise.

As in the case of JPM BAC reporting was better than expected EPS for primarily by a significant reduction in provisions to cover bad debts: provisions decreased by 17% QoQ, which gave approximately 13c in EPS. This is the 5 th consecutive quarter of decreasing the cost of redundancy. Bank of America also began to disband its reserves, which indicates a more optimistic view of the bank on the quality of its loan portfolio. The volume of non-performing assets decreased by 0.7% QoQ. Despite the dissolution of reserves, the reserve coverage of problem of arrears remained at about the same level – 136%. Net Data Recovery-tion for 2 consecutive quarters is negative territory: a pro-marching quarter it amounted to – $ 1.4 billion in bank write-offs decreased by 11.5% QoQ, with declining debt as in the consumer segment and the segment of loans to companies.

The bank’s income disappoint: the negative surprise was -1.5%. -Pation revenues were significantly below our expectations, at 6.4%. The main reason – a significant fall in net interest mar-Ms, -16 black. n. QoQ. Moreover, the bank’s return on operating assets fell, -14 B. n. QoQ, as well as increased value of liabilities for 6 b. n. QoQ (due to a significant increase in the cost repos). If we exclude from noninterest-up moves profits from the sale of units dealing with non-target busi-Nesom, a negative surprise of noninterest income is 4.1%. Considerable drop in revenue suffered by trading and investment activities, -30% QoQ, or 3% worse than our expectations. Loan portfolio decreased by 2% QoQ and management is continuing to celebrate rather weak credit supply. We expected that the amount of the loan portfolio will remain roughly at the level of the last quart-la. Operating expenses of the bank were worse than our expectations at 4.5% due to the relatively high salary costs, including for the payment of taxes on the bonuses in the UK. Capital Bank continues to increase: Tier 1 common ratio increased by 40 b. n. QoQ to the level of 8.0%, while the TCE ratio increased to 5.4%, 20 b. n. QoQ. We continue to see significant growth potential in the BAC, despite the rather negative statement for 2 nd quarter. Our recommendation remains unchanged at “buy” c target price of $ 26 per share of ordinary tion. It is possible that in the next 2-3 quarters will be the bank experience the specific problems with rising incomes due to low rates in the economy and weak demand for loans, but the possible negative effects from this, in our view, will be abundantly blocked by lower costs to cover bad debts.

Ukrainian Globalist
2010-07-16 19:43, Economics.

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