So we've seen major US banks announcing great results in the last week with Citi dropping in with $1.6 billion after almost two years of losses; JPMorgan $2.1 billion; Goldman $1.8 billion; Wells Fargo (reporting Wednesday 22nd) expected to post $3 billion; and Bank of America reporting $4.2 billion profits at lunchtime today.
Now everything in the garden is rosy, isn't it?
If anyone thinks we've seen the worst, then think again.
First, you have the USA running stress tests on the banks, which has all the bankers pretty stressed.
Second, President Obama said that more taxpayer money is needed to bailout the banks yesterday:
More taxpayer money is needed?
Fourth, did the banks actually make money in Q1, or were they gifted that money by another operator, such as AIG? Only two weeks ago I mentioned that Zero Hedge has spotted AIG were unwinding their complete credit default portfolio during January and February, which immediately gives everyone a bonus.
Finally, with Ken Lewis at BoA under threat and Merrill Lynch rumoured to be falling apart at the seams, can these large banks really expect to sustain growth and profitability through Q2?
Not if BoA is an example to follow where most of their Q1 profit came from asset sales and credit spreads ($1.9 billion gain from selling shares of China Construction Bank and $2.2 billion of gains tied to widening credit spreads). And take particular note that credit loss reserves were increased to $13.38 billion, up from the $8.54 billion in the previous quarter.
Don't be too cocky about these results.
Postscript: more can be seen about this at Bloomberg TV where I was interviewed this morning resulting in the headline: "Skinner Says 'Time To Move On' for Bank of America Chief"!!!!
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