So what is going one? Ignorant journalists and market 'pundits' write:
Bank stocks fall despite positive earnings trendsSo, how come those positive earnings are not welcomed by the markets? What's different today? It looks like investors are finally seeing through the smoke and mirror games of mark-to-fantasy and cook-the-books until they're done.
(AP) -- Bank stocks tumbled Friday as investors mulled over bank earnings reports that showed improved second-quarter profit as loan losses fell, but trading revenue also dropped as result of the market's plunge this spring.
Am I being too hard? Well, here are the proofs:
- Citigroup revenues were $22.1 billion, down $3.4 billion sequentially, on lower Securities and Banking and Special Asset Pool revenues.
- Citigroup’s total allowance for loan losses was $46.2 billion, or 6.72% of loans, down from $48.7 billion, or 6.80% of loans in the first quarter of 2010.
- Citigroup net income was $2.7 billion, down $1.7 billion, or 39%, from the prior quarter.
(in millions of dollars) 2Q'10 1Q'10 2Q'09 %I/(D)QoQ %I/(D)YoY
Diluted EPS from Continuing Operations $0.09 $0.14 $0.51 (36)% (82)%
Diluted EPS from Net Income $0.09 $0.15 $0.49 (40)% (82)%
So, basically, Citigroup's profit was $2.7 billion, and Citigroup's allowance for loan losses decreased by $2.5 billion (equivalent to a profit of $2.5 billion). So basically, Citigroup didn't make any profit. It was just an accounting trick. Given that, you can also guess that in order to reach those results, they must have tweaked many other things, and that the company is actually operating at a loss.
And here's for BofA:
Bank of posted second-quarter net income of $3.12 billion, or 27 cents a share, down from $3.22 billion, or 33 cents a share, from the same period last year […]
Net income applicable to common shareholders was $2.78 billion, up from $2.42 billion.
The company's provision for credit losses fell to $8.11 billion from $13.38 billion in the year-ago quarter. Net charge-offs rose to $9.56 billion from $8.7 billion.BofA is basically the same story. Notice how they try to fool the investors by announcing a net income that is not one. It's an operating income. To get the actual net income, you have to go to net income applicable to common shareholders!
So how much is it? $3.12b? And by how much the provisions for credit losses fell? 13.38 - 8.11 = 5.27.
So BofA is actually bleeding cash: an actual loss of 5.27-3.12 = $2.15 billion excluding all the other mark to fantasy and accounting tricks...
The banking sector remains a massive short opportunity... even though I don't have any position at it...