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Dick Bove, Rochdale Securities bank analyst, on earnings reports from banks and his predictions for earnings season.
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Seeing more straight ahead movement here that -- very as a bank analyst Iraq they'll securities' -- welcome to show.
Thank you terms.
Let's talk about these earnings today JPMorgan Wells Fargo what was the message about the big banks and what if -- -- what was the message about main street.
Well I think the issue which is really perplexing is that earnings were really very good for both companies.
Not only today you have beat the estimates but you know the dividends -- out -- buying back stock in other bad loans it down so so essentially.
What we saw was you know right across the -- generally good numbers so the question becomes why these stocks' doing so poorly when the numbers were so good.
And and I think it's because of the issue of sustainability.
I don't think I think -- when investors took a look at the numbers they made the decision that.
May be fixed income trading wouldn't be so strong as the -- -- Maybe the fees from mortgages wouldn't be so good because this harp program would dissipate over time.
May be they would be higher loan losses associated.
With home equity and based on those.
Resumptions.
This selling the stocks.
I don't think however that even if all of the issues that they have are correct and -- I think they are correct.
That the earnings are gonna be weak for banks this year.
An -- if indeed that is the theory then that means also that the street.
Doesn't have a lot of confidence and not necessarily in the recovery of America also.
Not a lot of confidence and in the banking sector to be able to do this without help not -- -- big proponent of the banks in.
You wrote a piece you want to save America stop attacking our big banks -- think people are little upset.
That you know they get all the money they get to prepare the balance sheets they get the buyback stocks they get to have a raises.
And yet none of it seems to triple down as they say into the main street economy.
You I think a couple of issues number one.
You know over a 150000.
People have been fired in the banking industry in the past twelve to eighteen months and you know bonus have been cut dramatically roughly 25%.
You know I guess is that.
Current estimate on Wall Street so bankers and are doing you know very very well in their own personal.
Accounts number one number two.
I think about it if in fact you it shut down the banks in 2008.
The banks -- have had to call all of the loans outstanding that they have.
Two people on main street.
Which means that since main street could repay those loans if there were asked to do so immediately you'd be shutting down businesses all over the United States.
And throwing people out of work so the reason why.
Every country in the world goes to protect its banks.
Because if it doesn't protect its banks it's destroying main street I think that's something which is not understood.
Okay but let's say let's go along that same bought line at same you know.
Not they have been saved not at the money has been thrown at them now that they are healthy or not they are buying back stocks.
When do they start to get some of this money -- into the systems and at the entire -- Think -- sort of rebound.
Well you know.
Loans to the commercial industrial sector.
Are up you know something like 70% year over year which is five times higher.
-- normal and and that's not understood because basically when you look at the overall -- figures was still running up pro problems.
In the construction portfolios the home equity portfolios.
The residential -- mortgage portfolios but in terms of if you will shoveling money out to that.
The business sector the banks have been doing it and they've been doing it very aggressively.
JPMorgan today actually said that their loans to do middle and small business sectors were up 26%.
Year over year so that's sector is getting the money the sector which is still in trouble is the housing market in the housing market.
You know I think -- barred him from for a bunch of reasons I can give you but that market is not gonna come back aggressively even though may have -- him.
You know events are saying because one area any want to get alone right now is -- and automobiles I mean really weekend at Bernie's -- guy and that it.
He can go get a car -- right now Mike in this that sub prime loan at that.
To get the housing thing -- -- did -- think the banks have to take a chance in other words may be.
Taking smaller.
You know down payments or lowering the Michael scores -- do they have to take something of a chance if we are -- indeed sparked this housing market back.
-- you know the reason why I say I think the housing market is coming back is number one I think about it that the housing market peaked in 2006.
And we've added three million people to the population every year since then so this is 2012.
You know by the end of this year eighteen million people have been added to the United States population -- more people -- live in Ireland Portugal.
You know.
Greece any of these countries that are in trouble secondly the affordability of housing in the United States.
Is at a fifty year high by that I mean.
Housing is more affordable today than ever before.
And the third thing is we're not building new houses as fast as the other houses which are dilapidated are coming out of use so you know.
Housing is coming back very clearly and what you're seeing anecdotally.
Is that people who buy distressed housing.
Dip paying up to buy it now Bill Gross is buying mortgages so you know that the industry is gonna recover this.
I guess I guess is another good government doesn't get the -- signal the -- -- -- you know I understand you're saying and obviously it's cyclical may be.
Finally it's bouncing bad you know coming back a little bit but that nudge that maybe it would need with the bank's been willing to.
The take a chance if you will but I don't think we're there yet picked you know I can -- -- all day long -- really appreciated that probate.
-- they'll securities bank analysts appreciate it.
