Thursday, October 15, 2009

What's My Blood Pressure Doc? - 10.15.09 - Banking

After reading through some press releases of some of the largest investment/commercial banks in the world I am a bit surprised. Sure I expected to see record trading profits from Goldman and Similar amounts from JP Morgan and Citicorp. Yet, Commercial lending still has not recovered, consumer loan-loss provisions have not decreased as much as expected, and credit is still tight everywhere. Is Goldman really doing the right thing allocating $16B for the compensation of employees? I am not saying bankers are overpaid or questioning compensation practices because I do believe in capitalism. The market sets the price for compensation so that is not my point here. My point is, If we see another downturn can Goldman sustain record trading in Fixed income, commodities, currencies, and equities? Not to mention, Goldman is now 2nd in Global M&A and further behind in underwriting of debt and IPO's. However, the firm has reduced leverage from 35 at the peak to 16x capital available for trading. The same profitable trading story can be told about JPM. Though, the company lost $(700)M in their credit card division for the 3rd Q. I thought commercial banks made profits from this business? I guess not. I need to do much more research and find out what the Tangible/Tier Capital equity ratios have to say about company health. Just as we receive physicals every 6 months banks should do the same. The process is humiliating sometimes, but it is also nice to know how healthy you really are.

Words of Wisdom: Don't buy into the hype, do your own homework


Patrick M. Ambrus
Analyze Capital LLC


  1. lol, i love the cheekiness of this blog entry. Good points made here, essentially the "core" business of banks have yet recovered; at least on the commercial side. For GS sakes, they should change their name from bank to big arse HF, or something like black rock. Worse comes to worse GS can trick the government into giving them more money when their trading strategies may fail them again if we see a W correction.


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