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Stifel Nicolaus Managing Director Chris Mutascio and Keefe Bruyette & Woods Director of Research Fred Cannon on the outlook for the financial sect...
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Group did report better than expected earnings today so will this give a boost to banks like Goldman Sachs and Bank of America.
Those two reporting later this week -- christmastime.
-- is a managing director of Stiefel Nicholas frank cannon is director of research at KPW.
Chris let me begin with you -- as mentioned Bank of America the latest numbers due out on Wednesday what are you expecting from -- -- day.
-- it would be very were expecting eight -- every bit of a struggle on the top line revenue growth -- received from from many banks.
And we're -- focus most importantly owners the net interest margin in the net interest income dollars.
Because what we're seeing so far at the margins stuff for the banks have reported so far compressed a fair amount.
And you couple that with the fact that the balance sheet of Bank of America is shrinking in order to raise the capital levels.
-- via a double edged sword in terms of revenue growth and what expectations could be in the future for the company.
OK so -- let let me get to fret because Fred you actually covered city so I want to get to about Wednesday.
That that's today's number certain levels -- -- forward to tomorrow some of the other names but Citi group's numbers up late is this a company now that you look at and you say.
The -- is it specific to Citigroup or is it a sign post for perhaps the rest of the financials of things might start to look better but of course keeping in mind that they missed.
On the bottom line.
I think it's a sign posted that -- -- and we're gonna do OK this quarter we have.
Wells Fargo with a nice -- we have JPMorgan beat expectations we have Citi now with -- nice.
Remember those big brokers we cut those estimates hard coming in and they're beating them.
And I would contrast a little bit with Chris I think that domestic bank's net interest margins are actually showing pretty good numbers so we're actually somewhat positive on the regional banks that.
-- let me get back to Chris -- I wanna get into this libel issues Citi certainly avoiding comment on it but we know in addition to Barclays has at least a dozen major banks.
That are being investigated.
This is a huge story in the UK hasn't really hit hey yet but it's -- -- could very well do so soon.
What impact is that gonna have -- of -- on the part of banks involved in this investigation.
I think it's anyone's guess right now in terms of what the impact to be formally -- from litigation perspective I think in the very near term.
-- -- strippers and say -- another headwind if you will from the headline risk perspective.
-- how this metastasized going forward over the next several quarters are several months and the couple quarters in terms of what.
Any type of fines or any types of other banks are part and parcel of the problem is is is not known yet but I certainly think it's just another risk that.
That impacts the PE multiples placed on the large cap banks.
Will Brad enhance was just on in the last -- Sanford C Bernstein Freddie he believes -- could be double what we saw with the Enron finds an -- funds were seven billion.
Again simple but -- you look at this you say -- Well core the names that people are looking at right now.
JPMorgan.
Citigroup Bank of America they were part of the Libor group that set these interest rates that.
Not saying they are involved but if there's any inclination could that hurt their numbers and therefore should investors stay away.
We do we're pretty cautious on that group and it's really those three in the US remember the rest of mark on the Libor panel -- -- these numbers are huge try to anyway sidetracked 350 trillion dollars -- contracts globally.
That are tied to this I mean every plaintiffs' lawyer and in the globe is gonna be coming after them.
And there's some real issues when you read that FSA -- at Barclays there's some real issues in this industry.
Do you think Chris that we've already seen -- what's happened to Barclays goes would Bob Diamond and that's several outlook.
Major -- us to have management stop being let go is that the scenario you -- -- playing out with the US banks.
I it really depends what you find out -- keep in mind that we don't know for for and we don't have any reason to believe yet that.
All -- -- in cahoots if you will and in lower in the Libor that was being reported.
But if indeed you do see some of the things happen yes I think you could have some management changes certain that certain banks because.
Kelly have a few once twice three times you start talking about risk management the board and and and the management level you're gonna have to start removing management teams.
Guys thank you very much Christmas dot CEO of Stiefel Nicholas and Fred cannon of KPW talking about.
