Wednesday, December 09, 2009

Tech Tickers: Bank Lending, Jobs, 2010 Forecast

Last Friday I had the pleasure of attending a Minyanville Festivus at the Hill Country Barbecue in New York City. A tip of the hat to Todd Harrison, the Minyanville professors, and the entire Minyanville crew for another fine outing.

While at the Barbecue I taped a couple of videos with Aaron Task at Yahoo!Finance. Please have a listen.

"It's a Good Thing Banks Aren't Lending"

For additional written insights from Aaron Task please see "It's a Good Thing Banks Aren't Lending," Says Mike 'Mish' Shedlock ... C,C,XLF,MS

After a year of record profits on Wall Street and with Bank of America set to repay its TARP funds, there's a growing sense the banking sector has healed, or at least on the road to recovery.

But the Fed says the banking sector is currently sitting on more than $1 trillion of excess reserves, defined as capital above what regulators require. If the sector is really healthy again, shouldn't they be lending more aggressively, to help get the "real economy" moving again?

"It's a good thing banks aren't lending," says Mike Shedlock, author of Mish's Global Economic Trend Analysis. "If they did lend, we'd have more defaults and more bailouts."

With unemployment to remain high and mounting problems in the commercial real estate market, more lending would lead to "more defaults and more bailouts," says Shedlock, an investment advisor at SitkaPacific Capital Management.

Industry veteran Peter Atwater, former Treasurer of Banc One among other titles, agrees the banks are not in a position to lend aggressively - even if demand for loans among creditworthy borrowers were to revive from its current stupor.

"The banking industry is really liquid right now," says Atwater, currently President and CEO of consulting firm Financial Insyghts LLC. "There's a huge difference between being liquid and being prepared for what's ahead."

As with Shedlock, Atwater foresees more defaults and more loan losses ahead for the industry, which he believes has already seen its peak profits for the cycle. In other words, there won't be any "windfall profits" to be taxed in 2010.
That segment was taped with Minyan Peter, now revealed as Peter Atwater, President and CEO of Financial Insyghts LLC, a twenty-five year veteran in the financial services industry.

Atwater's experience includes thirteen years at JPMorgan, as Head of the Asset Finance Group (responsible for non-mortgage securitization), an Executive Vice President and Treasurer of credit card issuer First USA, Treasurer of Banc One, Chief Operating Officer of Banc One Investment Advisors, and CEO of Bank One Private Client Services.

Kevin Depew has a 20+ minute video Unmasking Minyan Peter ... ex/a/25243 that inquiring minds will want to listen to when they have a spare half-hour. For additional insights click to See What Peter Atwater Has Written. ... rib_id=106

Among my favorite "Minyan Peter" posts is a set on bank balance sheets from August and September 2007.

Minyan Mailbag: A Bird's-Eye View of the Credit Conundrum ... ex/a/13898
Minyan Mailbag: Bank Earnings 101 ... ex/a/14041
Bank Earnings 102: The Best of Times, The Worst of Times ... ex/a/14058
Bank Earnings 103: Reading Bank Balance Sheets ... ex/a/14098
Coming Bank Themes: Whispers From the Confessional ... ex/a/14061

My favorite snip is from Bank Earnings 102:

The income statement is the past. The balance sheet is the future. Let me repeat it again. The income statement is the past and the balance sheet is the future, especially now.

At the top of a credit cycle, the income statement for a financial institution shows “the best of timesâ€