This Day On The Street
Continue to site
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

'Decent' Loan Growth Best Feature of Regional Banks' Q3 Earnings

NEW YORK ( TheStreet) -- For investors following U.S. bank stocks, the most positive aspect of third-quarter earnings season has been strong growth in commercial and industrial loans for several key regional players.

It was a mediocre quarter overall, without much excitement when it came to upward revisions of sell-side earnings estimates. "Including the universal banks (BAC, C, JPM), consensus EPS estimates for '14 for large/midcaps decreased 0.5% on average through earnings season. Ex. the universals, estimates decreased 0.4%," according to Jefferies analyst Ken Usdin, who summed up third-quarter industry results in a client note late Friday.

JPMorgan Chase (JPM - Get Report) made the biggest splash this earnings season, with a $387 million net loss, as the company set aside $9.15 billion for litigation reserves during the third quarter. The bank also surprised investors by actually reporting it had $23 billion in litigation reserves on its "fortress balance sheet," the term repeatedly used by JPMorgan CEO James Dimon.

JPMorgan is expected to enter settlements with the Justice Department and regulators covering criminal and civil investigations of the company's securitization of mortgage loans, as well as other mortgage-related areas. The total settlement cost to the company could be as high as $13 billion, according to various media reports. The first part of the big round of settlements was announced Friday, with the Federal Housing Finance Agency (FHFA) -- which regulates Fannie Mae (FNMA) and Freddie Mac (FMCC) -- announcing a $5.1 billion agreement.

Mortgage Blues

Aside from the continually unfolding JPMorgan saga, the biggest trend for the banking industry in the third quarter was the tremendous decline in mortgage loan refinancing activity, along with a decline in gain-on-sale spreads, as a result of rising long-term interest rates. "Mortgage production fee revenues nearly halved Q-Q as originations dropped 20% and gain-on-sale margins declined 30%," Usdin wrote, adding "We expect another 20% reset in production fees in 4Q as origination volumes reset lower again."

Usdin is not thrilled with prospects for improving noninterest income for the industry as a whole: "There is not a ton of momentum in most other fee income categories, and we believe tough mortgage banking comps will limit overall '14 fee growth to a few percentage points," he wrote.

Credit Leverage

1 of 3

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

David Peltier identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
FRC $70.32 0.00%
JPM $63.20 0.00%
SBNY $137.83 0.00%
TCBI $45.82 0.00%
AAPL $93.74 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs