Morning Report: Bank earnings take a hit on reserve build

Vital Statistics:

 

Last Change
S&P futures 2805 40.1
Oil (WTI) 21.23 0.29
10 year government bond yield 0.75%
30 year fixed rate mortgage 3.37%

 

Stocks are higher as we kick off earnings season and participants start to look forward to opening up the economy. Bonds and MBS are flattish.

 

JP Morgan reported earnings this morning. EPS came in at 78 cents a share, well below the $2.65 a year ago. $1.66 of the earnings hit was a reserve build for future credit losses. Originations almost doubled YOY to $28 billion and the loan portfolio shrank. The servicing portfolio also fell. The stock is up 3 bucks pre-open. No update on forbearance requests that I can see.

 

Wells reported a breakeven first quarter after charging 73 cents a share for reserve build. Origination was up 45% YOY to $48 billion. No update on forbearance requests that I can see. The stock is up a couple percent on the open.

 

Retail and hotel CMBS are missing April rent. “The market for commercial real estate mortgage loans in the United States stands on the brink of collapse,” real estate investment firm Colony Capital CEO Tom Barrack said in a Medium post late last month. “If these institutions are not permitted to maintain the flexibility and patience needed to undertake the loan restructuring efforts that will be critical to weathering the Covid-19 crisis, loan repayment demands are likely to escalate on a systemic level, triggering a domino effect of borrower defaults that will swiftly and severely impact the broad range of stakeholders in the entire real estate market, including property and home owners, landlords, developers, hotel operators and their respective tenants and employees.”

 

US Treasury Secretary Steve Mnuchin reassured mortgage servicers on Monday that Treasury was aware of the problems in the sector. “We’re going to make sure that the market functions properly,” he told reporters at a White House briefing. He added that the Treasury Department has had discussions with the Federal Housing Finance Agency about the mortgage market. “We have all the appropriate people on it,” he said. “We’re very aware of the issue.” Meanwhile, NAR provided some cover fire for the industry.

 

CNBC is reporting that 2 million homeowners have applied for forbearance so far.

40 Responses

  1. I believe that as a society, the United States peaked with the moon landings.

    The contrast between the “successful failure” of Apollo 13 fifty years ago this month and the reaction to COVID-19 by all institutions just makes it that much more obvious.

    Like

    • and the comments… oh sweet Jesus!

      I could chisel granite, IYKWIMAITYD.

      Like

      • This comment has to be a troll, it’s so on the nose!

        KygreOregonOak
        Apr 14, 2020 at 01:36:57 PM
        These pacts aren’t going to work as well if they have large numbers and become cumbersome.

        There is going to be a big table with people arguing things out, with people representing their states. Maybe on this single virus issue, that wouldn’t be a problem.

        But what is being imagined is that the pact is a foundation for other types of self-protection from an inept or malicious federal government.

        When designing responses, consensus will be harder to achieve with larger numbers at the table.

        (On the other hand, depending on the issue being dealt with, larger numbers might be beneficial. Resisting martial law for example.)

        But generally, I think a group of smaller pacts would be more nimble and focused and capable. And of course there could be “pacts of pacts”. The pacts could collaborate and cooperate.

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  2. Not to brag, but I got my TrumpBux today.

    Liked by 1 person

  3. Well, Walter and I haven’t received our Trump $$$ yet but we did get a rather large order from Taiwan today with a nice money transfer so I might be sleeping a little better tonight.

    I’m a seamstress/quilter/reluctant/bookkeeper so I have all the supplies for the most part to make masks and have made about 50 to 60 so far for family, friends and neighbors. In response to my efforts I’ve received flowers, a bottle of wine and 4 rolls of TP.

    I finally got some elastic again so I’m still making masks. Today I went to CVS when they opened and was the only customer in the store other than the Pepsi guy. It was the first time I went out in over 3 weeks and I wore both gloves and mask…………very strange.

    My county (Riverside) is actually a bit of a hot spot here in CA so I’m watching the numbers every day. We are now 2nd behind LA County in the number of cases. Luckily we have an awesome statewide plan to keep us all as healthy as possible and a plan to get back to some kind of new normal.

    I’m a Californian born and bred so I’m still thankful that as a “nation state” we still have some influence and a plan to stay ahead of the curve. I have a feeling that the framework of the plan we have here may be the same framework the rest of the states enact. We’re accepting Fed help when we need it, ignoring the political conversation, and using our buying power to procure our supplies and help others as well.

    Newsome promised last week to send “swat teams” (in the form of medical personnel and PPE) to our nursing homes across the state and today they showed up here in Riverside County.

    A promise delivered!

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    • Glad you got your Taiwan order in.

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    • lms:

      California…as a “nation state”

      If only!

      In any event, I do like your newfound admiration of federalism and the 10th amendment. I hope it lasts beyond the Trump administration.

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      • I put that in quotes Scott because it’s kind of a joke around here that people assume we’re going to break away someday. Most Californians know that would never happen. We do have some advantages though, being the 5th largest economy in the world.

        And you know I’ve always been selective about Federalism, LOL

        Just because I believe a National Health Plan should be enacted doesn’t mean I don’t understand the rights of states vs the Federal government.

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        • lms:

          Just because I believe a National Health Plan should be enacted doesn’t mean I don’t understand the rights of states vs the Federal government.

          True. It just means you don’t find it particularly important.

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        • You really don’t know what I find important Scott. My world isn’t black and white.

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        • lms:

          You really don’t know what I find important Scott.

          True, I can’t get inside your head and read your thoughts. I can only draw logical conclusions from what you say.

          Do you find states rights important?

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      • California…as a “nation state”

        If only!

        Texas could be devolved into a nation but CA would have to get off the western power grid.

        I think enthusiasm to split up the Union on the left and right is utter bullshit, and probably whiskey talk, on top of it.

        But there are lesser levels of devolution of power that ought to be open for discussion, I think.

        I would start with a re-examination of federal criminal law overlap, but YMMV.

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  4. LOVE the Tweet and the replies!

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    • does the left get the reference?

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      • I get it. Is the right, other than Liz Cheney, trying to rein the President in as far as the 10th amendment?

        I don’t understand why this is a political football as opposed to a health/economic crisis.

        It’s okay though, you guys will thank CA for leading the way again…………LOL

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        • lms:

          Is the right, other than Liz Cheney, trying to rein the President in as far as the 10th amendment?

          What has Trump done that makes you think he needs to be reined in with regard to the 10th aendment.

          I don’t understand why this is a political football as opposed to a health/economic crisis.

          Politicians are involved. That makes it political.

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        • What has Trump done that makes you think he needs to be reined in with regard to the 10th aendment(sic).

          Premise is a bit selective, no?

          See, for example,

          https://attorneysgeneral.org/multistate-lawsuits-vs-the-federal-government/list-of-lawsuits-1980-present/

          and read on down to the list of state litigation against the Trump Admin. Many of the suits involve significant federalism issues. Perhaps almost all of them purport to involve federalism issues, but that is always a balancing act and if “commerce” or “border security” is involved Big Daddy usually wins [e.g.; see Wickard v. Filburn].

          In any event you will find the list interesting, but probably would under any Admin, for that matter.

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        • Mark:

          Premise is a bit selective, no?

          No. It was precisely the premise forwarded by lms, which I then wanted to question.

          In any event you will find the list interesting, but probably would under any Admin, for that matter.

          Well that was pretty much what I figured, and was the point of my asking. The Trump admin may indeed be trashing federalist principles, but not in any unique way that hasn’t been done by every president since probably FDR. Hence I wonder why anyone would think that he needs to be “reined in”, at least any more than any other president from the recent past.

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        • I see Mark has a list of things I’m not familiar with for the most part. I was primarily laughing at the absurdity of Trump stating that he has the ultimate power to end the “Stay at Home” orders most states have initiated. He sort of reversed that yesterday by saying he would let the Governors decide, with his wise input apparently.

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        • You should always look at the actions politicians take versus the words they use. I’ve learned that through bitter experience.

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        • lms:

          I was primarily laughing at the absurdity of Trump stating that he has the ultimate power to end the “Stay at Home” orders most states have initiated.

          Saying obviously wrong things has nothing to do with the 10th amendment. Someone should definitely rein in his rhetoric. But reining him in with regard to the 10th amendment? Definitely no worse than his recent predecessors, and an argument can probably be made that he is much better.

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        • Compared himself to Captain Bligh yesterday morning on his twitter feed. Thought he was bragging because he thought he was needed, like Bligh was needed, in some good way.

          I didn’t recall Bligh as the hero of The Caine Mutiny Court Martial, but I am getting old now.

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        • Well, for the men that stayed loyal, Capt Bligh was a hero and saved their lives after being set adrift in a small boat. Fletcher Christian et al ended up killing each other on Pitcairn Island. I tend to side with Bligh that the mutineers weren’t the good guys.

          As for The Caine Mutiny, that was Capt Queeg.

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        • Mark:

          Like I’ve said in the past, I generally can’t stand his rhetoric so I try not to pay any attention to what he says. What I care about is what he does.

          BTW…Captain Queeg, not Captain Bligh, was the character I think you have in mind from The Caine Mutiny Court Martial, although the real villain in the Caine Mutiny was not Queeg, but rather officer Keefer, the one who mocked Queeg and goaded his friend Maryk into leading the mutiny.

          Captain Bligh was a real person, portrayed in Mutiny on the Bounty. He actually was somewhat of a hero in that, after the mutiny and getting set adrift in a lifeboat with his loyal shipmates, he managed to navigate the lifeboat with a 5 day ration of food on a nearly 50 day journey through hostile islands and open water back to a British protectorate, saving the lives of most of his boatmates. See the movie with Anthony Hopkins and Mel Gibson. It is actually pretty good.

          edit: Corked by McWing. Several times!

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        • Thanks. You guys are correct. He was using Mutiny on the Bounty as his movie reference and not the Caine Mutiny Court Martial and I conflated the two. He may actually have had a point. Score one for him and minus one for me.

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        • McWing, I look at both because oftentimes the actions I dislike follow the words. I think words are important but I agree that actions matter more. Once again, our governor seems to be a man of action and his words are measured and focused on facts right now. I suppose he’ll get back to a political framework at some point but for now he’s an actual voice of reason and calm. He’s not my “Daddy” lol, but I do find some reassurance that he’s the one taking charge during this unprecedented time. I guess you could say I trust him, very unusual in a politician.

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  5. Here is the broad outline of what we’re going to be working on here in CA over the next several weeks as we answer these questions. Laying the groundwork for getting people back to work and slowly opening up business again requires a certain amount of planning. We still have cases increasing overall most days in CA but at a very manageable rate from a health care standpoint. Many of these things require some sort of infrastructure to be put in place first and we’re waiting to see our curve trend downward before we get too excited about the future. Our Governor thinks we’ll be able to set a timeline in a couple of weeks.

    Whether there is sufficient and fast enough testing to monitor any outbreaks, including by tracing, testing and isolating people who have been exposed to the virus.
    Whether officials can prevent infections in vulnerable communities, like among older Californians, and those experiencing homelessness.
    Whether hospitals are equipped to handle surges of patients, with enough beds, ventilators and protective equipment for workers.
    Whether there’s progress on developing therapies that could help patients recover more quickly. Mr. Newsom said he was optimistic as the state’s research institutions and biotech companies focus their efforts.
    Whether physical environments have been adapted to the new reality, with plenty of space for people to keep their distance. This will be especially critical for schools and restaurants.
    And whether state and county officials can quickly reinstate stay-at-home orders or other measures if necessary.

    Riverside County where we live (in the furthest western part of the county), has the 2nd highest number of cases in CA and we’re a bit of a hotspot within the state. We’re second only behind LA County now. My little horsetown community only has 10 cases so far but the rest of the county isn’t faring quite so well. The state began sending “strike teams” to the assisted living communities to help with PPE and staffing issues as well as testing all residents and staff in the hopes of taming the infection rates here.

    I’ve been sewing masks for over a week now for family, friends and now neighbors. I leave them in a plastic bag on the front swing with the name of the family I made them for. I’m going through the Nextdoor Neighbor app to connect with people who might need them. Walter saw an elderly man at the grocery store last week wearing a pair of boxers wrapped around his face and so I decided that we could do better than that. I’m donating them of course and make between 10 and 15 masks a day. Over the weekend families I left them out front for left a bottle of wine and flowers for me, so unexpected, and yesterday I received 4 rolls of TP for 4 masks……………sooooo funny.

    I left the house for the first time in 3.5 weeks yesterday to go to CVS when they opened. I was the only one in the store, other than clerks and a Pepsi delivery guy. I wore both mask and gloves and it felt bizarre to be honest.

    Hoping this ends soon but I’m not counting on it yet. Hope you’re all doing well.

    Like

    • Watching Newsom since this began has been a lesson in good government in a crisis. Also Inslee, Hogan, Beshear and DeWine deserve credit for early smart action. Newsom got big bucks for this from his lege early on, a real trick, like Jerry Brown used to do, but he did it really fast.

      The Pacific Coast got hit first but responded fast. Cuomo gets a lot of media pub for his management, but he was slow to respond forcefully where the other govs I named were right on it.

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      • We watch Newsome’s briefing everyday at noon and he continues to impress us with sticking to the facts and acting quickly to stay ahead of problems. I agree with you re the others, Hogan is a new favorite of mine.

        Like

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