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Guggenheim Securities Analyst Marty Mosby on the outlook for Wells Fargo, J.P. Morgan and the financial sector as a whole.
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Let's bring in money -- Well in general we saw was he had a solid core earnings quarter.
They reported in 130 range but when you back out the four point four billion dollar -- -- loss that they took.
And then also take out some of the positives that you just heard about you end up with a bottle of dollar fifty cents which is an upper end of their normal range so core earnings were solid.
The other thing that we saw on the numbers was that the CIO hedge position going forward was why you have some potential loss only in a worst case scenario.
In general the loss and exposure is contained which is what the market wanted to hear.
So Marty are you advising clients to own these stocks at these levels JPMorgan Wells Fargo even though we haven't.
This is just the beginning of the financials reporting earnings.
We have we have -- on both JPMorgan Wells Fargo they're two of our what we think most undervalued large cap bank stocks.
For instance if you take JPMorgan.
And look at their growth that they had in tangible book value in just this one quarter.
Kindle book value grew 6%.
That's an annualized 44% growth without any revaluation related to dealing with this overhang from the Santo hedge position.
So you get a 20% -- just on retained earnings.
And you also get the 3% dividend yields so yes.
We think there's value in the group right now.
Money very quickly do you think Jamie -- comes out of this is he looking like he's in control as opposed to being out of touch as this I've been a good day forum.
I think starting -- testimony -- part of congress was the first step in the right direction.
They have put their hands round they showed an extensive review of what they've done to correct the issue.
-- so as you're looking at you know they've been able to disclose the issue they've been able to correct for it.
Yet we think -- made some progress today to continue to regain his confidence in the market place.
Hey Marty in you don't just like the big bank names you're actually a big fan of some of the smaller regional banks at these current levels.
Yes there is some recovery stories that we like.
For instance first horizon this quarter got the mortgage repurchase expense behind them.
That takes out fifty million dollars -- they've been experiencing each quarter.
-- -- there you know doubling their operating earnings we got Regions Financial reporting and a couple weeks.
They also -- got TARP off their back now -- a big boost in their core operating earnings so.
We got some regional banks here there are showing some much recoveries.
And in those from -- we continued recommend.
At a let me bring you back in new -- having to do anything to listen into the conference call in the media session as well on.
What was -- -- what was so Jamie Dimon -- 'cause he was on -- questions.
We actually were good live shots -- got to -- to a very small portion of and it's very matter of fact when I did hear what he had to say.
Right very good so you think that like money's coming out of this okay because lot of questions about.
Is he out of touch ma am not so series come out OK I arrived at well that's the question -- out of touch that would pose to Marty look this is happened under his watch -- not holding debt I don't think -- -- -- diamond accountable -- blaming him but he's now alluded to traders lying or its leading bank supervisors that happened under his -- -- other issues that we're not talking about statement that played out under his watch here it JPMorgan -- that analysts who have been coming -- they actually bring -- there was this settlement on a year and a half ago over mortgage situations in which they were for closing on the homes of veterans that happened -- -- -- much.
There are these accounting maneuvers that he himself has said in the past.
He doesn't life you know the two point one billion in loan loss reserves.
Using debt valuation adjustments all this under Jamie Dimon and they haven't addressed lied or yet he took a question not -- or now right -- that.
He took a question but it really answer ready said we're -- cooperate essentially as well all of the banks and that sue if it should.
Hit -- speculated Barclays or may be if they are one of those quote other banks receive -- EC settlement know -- saying it's JPMorgan Chase but if it is.
That happened under his watch -- at what point.
Does the mud stick to a.
-- -- gotten answer that answer that question.
All share.
A lot of things are tumultuous first talk about the accounting -- -- It's not that he -- again separating those out of the core earnings has not that he likes having that in the reported number that's just the normal given to eight.
-- you get in each quarter.
We have -- getting.
Attorney mark mark -- Mart eight yes -- debt.
Let's talk about debt valuation adjustments if I take out a mortgage.
For 300000 dollars in the value of my properties 300000 but it balls to say 250000.
I can't tell the world that I -- made -- 50000 dollar game.
Banks get to do that.
Since 2008 that's what -- DA allows them to do so find an investor Eric why why why would I believe that as a signal that things are healthy that's is that limited -- yeah.
It's.
No it's it's it's basically you're exactly right your debt getting readjusted depending know what -- credit spreads are in the marketplace.
But nobody's counting that in the core earnings us what I'm saying.
And so it is a noisy -- -- the quarterly report but it's not a part of -- fundamental core earnings that he likes counting on for next quarter.
Very good discussion Adam Shapiro outside JPMorgan.
Tickled us here Manhattan all day -- -- -- money most BR Guggenheim securities analyst -- to talk about a lot more to.
