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
TheStreet Open House

'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) 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

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

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
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, 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
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 17,143.87 +72.65 0.43%
S&P 500 1,983.09 +5.29 0.27%
NASDAQ 4,516.0420 +10.19 0.23%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs