NEW YORK (TheStreet) - The big theme among U.S. banks this earnings season was the boost to the bottom line from the release of loan loss reserves. That trend is likely to accelerate as credit measures continue to improve.
For U.S. Bancorp (USB) -- the fifth-largest domestic bank holding company by total assets - reserves more than doubled.
During the second quarter, four of the five largest holding companies reported net charge-offs - loan losses less recoveries - exceeding provisions for loan loss reserves. This "releasing" of reserves directly affects earnings, and for Citigroup, the second-quarter reserve release was more than half of net income.U.S. Bancorp bucked the trend, as the Minneapolis lender continued to build loan loss reserves. During a discussion with TheStreet on the prospects for the largest banks over the next few quarters, Jamie Cox, managing director at Harris Financial Group in Colonial Heights, Va., said "the reserve reduction provides enormous earnings power going forward." Cox thinks that with the uncertainty created by financial reform softening the market, "this is a fantastic time to accumulate," adding that JPMorgan is his favorite pick as a long-term play. He also disclosed personal holdings in Citigroup and Bank of America, with a shorter-term outlook. The following is a summary of reserve growth, coverage and loan loss activity for the group of five.
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV