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JP Morgan and Wells Fargo Kick Off Earnings

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    FBR capital markets analyst Paul Miller weighs in on big bank earnings.

  • Duration 3:35
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Right because they want to -- -- -- shares of JPMorgan and Wells Fargo tumbling today take a look -- you can see both in the red Wells Fargo down about 3% JPMorgan down one -- -- That's despite both banks reporting record profits thanks to gains in mortgage lending would get a break down the numbers forces -- he's an analyst with FBR capital my markets and -- Let's start with JPMorgan certainly a stronger headline revenue number -- does -- -- did so this.

I guess let's start with the -- what did you like about JPMorgan's.

-- What does not a lot of magazine JPMorgan earnings is a lot of positives there they they handily beat numbers they beat it across the board pretty much on every line item.

I mean mortgage bank did you mention was very strong balance sheet yet it was it was a little down but that but -- running off a legacy portfolio that's not a big concern.

The net interest margin that's the margin a gift from making loans was down only slightly four basis points and had very strong -- -- markets and investment banking market so.

You know -- JPMorgan just released today probably JPMorgan would have been fine with rest of the space it's wells -- dragon's face down with Wells Fargo.

They're net interest margin this is their yield that they did.

For Rai from lending out dropped 25 basis points and that's what's weighing on the space that I.

And what can he do in his low interest -- this incredibly low interest well those margins always going to be impacted on -- That's exactly right as long as essential banks of this of this world's -- print money like they are.

And net yield curve remains which is gonna cause that your current remained flat as as long term as as long term yields are -- You're not you don't have a lot of pressure on fundamentals of that -- And is not a lot you can though I mean you could you don't wanna take up too much to -- -- means go way down the curve -- you don't you don't get stuck with these mortgages -- kind of have to.

You know shrink your balance sheet and do the best she can.

Now the reason why don't make it record numbers especially wells is that mortgage back -- -- working really really well but.

Is everybody knows mortgage bank considered -- -- is can be gone tomorrow.

Not saying this is gonna disappear next year next year but a couple of years out you don't have the mortgage banking revenue and you have this slowed him.

That's what people concerned about.

At the -- father -- particular one in three mortgages.

In the US originate with -- Wells Fargo obviously you've obviously would like to see them diversify that revenue -- little bit.

Well they are -- do you ever really diversified revenue stream I believe on it suggests that.

That -- that don't wanna get more credit on that loan portfolio than they're gonna get from mortgage banking revenues and mortgage banking revenues they are looked kind of as of -- -- earnings stream they'd much rather see a portfolio.

And that's gonna get to more and more -- credit so -- they made record profits is what people don't like is the mix of revenue is where is is as a lesser quality.

There are those -- that say the banks of boosting their profits because they're slashing reserves for bad loans is that.

-- -- -- You know not for these two institutions they have very high reserve levels so I I think it's not a concern for the for the -- sort all right I you know JPMorgan I think released 900.

Million but they have well over 3% reserves of -- concern for these guys don't you start going back to the small entities the regionals.

That was -- concern.

We've seen a lot of that reserve releases that this earnings that that's probably gonna go away in a quarter so I'm very quickly ten seconds next week Citigroup Monday we're expecting from Citi.

No we don't really cover city I'm probably expecting the same is as that we -- today.

Probably decent mortgage banking revenue run the portfolio shrinking in the pressure on the -- Very good for knew him poll -- with the FBR capital markets thank you so much.

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