CNN (among nearly all mainstream media outlets) is reporting that investors are bracing for a tough week as the nation’s biggest banks are releasing quarterly earnings reports.
“It’s not going to be a pretty sight,” said Frank Barkocy, director of research at the investment advisory firm Mendon Capital Advisors in New York, which owns shares of a number of large banks including Bank of America and Washington Mutual.
Of the five banks and brokers scheduled to report results next week, three are expected to post a fourth-quarter loss - Merrill Lynch (MER, Fortune 500), Citigroup (C, Fortune 500) and Washington Mutual (WM, Fortune 500). JPMorgan Chase (JPM, Fortune 500) and Wells Fargo (WFC, Fortune 500) are expected to report a decline in quarterly earnings.
Once this is over, can we put the problems behind us? Or are we just seeing the tip of the iceberg?
One area of concern among analysts covering mortgage-focused banks like Washington Mutual and Wells Fargo is how these companies’ commercial real estate portfolios are holding up, an area that some suspect could be the next trouble spot in the credit markets.
“If it does happen, that’s another whole leg down for these banks,” said Paul Miller, an analyst with Friedman, Billings, Ramsey & Co., regarding the possibility of a commercial real estate slump.
“If it does happen”? “Possibility of a commercial real estate slump”? We recall reading not too long ago that office vacancy rates were already increasing, indicating a ’slump’ is underway.
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