Minyan Peter at Minyanville offers quite balanced take on the results so far, that are driving so greedy behaviour in equities. James Kwak at The Baseline Scenario is somewhat "sharper" ...
Well, to sum up, the "stunning performance" is driven:
1. by hefty fees for mortgage refinancing (this actually may mask also actual credit losses via restructuring under "refinancing"...)
2. by being short own credit risk (substantial parts of net income)
3. by smaller write-downs, charge-offs, reserve builds than estimated by consensus analyst (because credit environment improved with rising unemployment, credit market conditions?), and applying accounting tricks
4. and here comes the real positive, by a lot of "investment banking revenues", where the quote from Credit Weekly by strategy team at Societe Generale on 3rd April characterizes the business very much (their original emphasis):
Our supply estimates for this year have been thrown off kilter by the crisis. It appears that at this rate, we will see a record level of annual issuance (more than the €200bn seen in 2001), most likely by the time the third quarter is over. The data shows that corporates have raised a large amount of cash - and judging by the capex cuts, lower M&A and job losses, they are hoarding this cash in case the current sunnier outlook turns duller. It has been a grab fest of epic
proportions.
Well, if the economy is recovering right now, then it was one-off affair. If we turn down again, then it will grow as another problem ... That' s my "bullish take". But markets love buying trash right now.
ORIGINAL MESSAGE FOLLOWS
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US bank senior credit spreads still wide ...
Chart courtesy of BNP Paribas, Credit Driver, 17 April 2009, click to enlarge.
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