De amerikanske banker havde støre handelsindtjeninger i andet kvartal, men en analyse fra JPMorgan viser, at divercificerede banker har en mere solid indtjening end specialiserede og regionale banker. De vil formentlig klare sig bedre i de kommende kvartaler, som Wall Street-banker venter bliver langt dårligere på grund af den langstrakte coronakrise.
Thought of the week
Last week, second-quarter earnings results for Wall Street’s banks provided investors with some clarity on how financial companies are managing through the pandemic.
While at the sector level earnings for financials are still expected to fall roughly -57% in 2Q20 relative to a year ago, earnings releases suggests banks with more diversified revenue streams are performing better than expected.
As shown in this week’s chart, the diversified banks generated half of their revenue in the second quarter through fee-based channels like banking and trading services, all of which improved noticeably as market volatility boosted trading activity and robust corporate borrowing boosted underwriting revenue.
On the other hand, smaller regional banks generated most of their revenue from traditional lending, making their earnings much more sensitive to the low interest rate environment.
It should also be noted that while many banks reported large increases in loan loss provisions – an expense set aside for uncollected loans and loan payments – in order to weather the expected increase in defaults caused by the pandemic, they are well capitalized and therefore able to bolster these positions.
Going forward, the key question is whether missed payments will be forgiven or if the loans will be extended. Even so, the prospect of additional fiscal stimulus and monetary support suggests the loan loss build seen over the past two quarters should prove to be sufficient.
