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Rochdale Securities’ Dick Bove on JPMorgan’s earnings results and what it says about the banking and housing sectors.
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-- -- Don't know if you wanna take a direct look at JPMorgan I think you have to look at it.
From the standpoint that there -- four companies there right there's the capital markets company.
Which is involved in investment banking and trading and their results were horrible I mean basically.
The year trading activity JPMorgan was it was a major disappointment.
I would say that that they're running their trading book right now in about 25%.
Of what would be normal.
Investment banking is down to about you know two thirds of what would be normal -- six.
-- is lending was -- and their retail business was strong as well I know you're getting to that I wanted to ask you Jamie Dimon said on the call that they were getting killed on mortgages.
What does their data tell you about where we are in the cycle on mortgages and it housing.
But -- killed on mortgages wasn't on the origination of mortgages where they get killed on mortgages break was that they have mortgage servicing.
Hedge didn't work.
Right now the words they do not hedge properly against the change in mortgage servicing revenue.
And therefore basically.
They took a significant if I C 700 million dollars quarter over quarter hit as a result of the differential.
However I think housing has turned.
Let's let's take a look at some numbers there also.
You we we peaked in housing what 2005.
It was sitting here in 2011.
Twelve.
With six to seven years beyond the peak of the housing industry in the bubble is is all gone.
We've actually added eighteen million people to the population.
Since 2005 to think about that.
There are not eighteen million people in Portugal they're not eighteen million people in Greece -- and Ireland but we added that to the population.
We're adding population at the rate of three million people.
A year so over 678 year period you know you're gonna have to find housing for an additional -- it wants -- 24 million people -- -- same point in time.
A lot of challenges -- you know when it keep our discussion based on the financials here the housing -- is certainly interesting.
I think America announcing that its retreating from certain markets -- the country if it's financial woe is get worse do you see that happening for BofA.
No I don't I think that what you like good to see and be very is that you know this company has expanded pretty dramatically.
Over the past 2530 years it's bought everything in sight right in other words.
The concept the drove the company into a human call or -- to Ken Lewis was -- out -- and by as much as you can -- so the net effect is.
They've got too much and they've got to Whittle it down they've got to get rid of branches in the wrong areas they've got too many people they have too many accounts they've got to get rid of all much of there.
Customers who just aren't profitable and they're gonna get rid of businesses and over the last two years they've gotten rid of about thirty businesses and my guess is.
They will get rid of another thirty before the finish.
And I think it'll make it a much stronger much more profitable company -- Retreat from certain marketplaces who does that create an opportunity pours it chases a Wells Fargo and and which financials do you like right here.
Well I I think that today you definitely see Wells Fargo moving into a series of markets around the country if Bank of America.
Leaves those markets but I you know I don't think the Wall Street Journal was correct in what it said today I think that that you're not gonna see.
Bank of America are abandoning markets but.
It's there's -- financial slump mean you've got this tremendous surge in couldn't commercial lending that we saw in the in JPMorgan numbers today right.
So you go looking around and saying who is the best commercial lenders in the United States that are not.
Polluting their business with other if you will activities in you would have to say -- America is a clear buy as a result of this.
Fifth third is a good -- you would take a look at US Bancorp and you look at KeyCorp because all of those companies are heavily oriented to commercial lending.
If you will looking at traditional banking overall what you're seeing is again this enormous increase in deposits in the banking system.
You've seen that loan volume is going up not just in commercial loans.
But it's going up in credit card loans it's going up and auto loans it's going up to a smaller degree in student loans and that means that.
You gonna see relatively strong earnings out of each one of the regional banks and report over the next.
Eight to ten days so I would be buying regional bank stocks.
And that would include -- T and that would include PNC and possibly even suntrust.
I still like Bank of America are a lot and I like Citigroup.
Our existing Dick OK thank you so much for joining us they're really appreciate -- -- -- totally disagrees with that report that we saw in the journal spacing Bank of America's retreating yet that was ever.
