24/7 Wall St.

DJIA component and financial giant JPMorgan Chase (NYSE:JPM) is set to report earnings Wednesday morning before the open.  We have First Call estimates at $0.90 EPS & $16.6 Billion, but based upon the performance of the bank stocks after the earnings we’d expect a lower whisper number to be in place (maybe that would make it a whimper number).  These estimates may have even come in since this morning.  JPMorgan Chase is supposed to have some of the highest credit standards out there as far as clients and that may help it related to other lenders.  Shares were down over 3% with a n hour to close today and then shares closed down 2.5% at $45.11, and its 52-week trading range is $42.16 to $53.25.

Citigroup (NYSE:C), US Bancorp (NYSE:USB) and Wells Fargo (NYSE:WFC) have all been hit hard after earnings.  At some point the bad news gets priced in.  The problem that 24/7 Wall St. has is that even if the company meets lowered expectations from Wall Street is that there seems to be no good news ahead for lenders even if there some pockets of "Less-Bad" news.  Despite a slight drop in rates, the borrowers in about 50% of the economy aren’t really in any better shape than they were.  Another immediate FOMC rate cut is also not a sure thing at all, and we don’t expect with any certainty that the Fed will step in a second time just because these earnings are lower.

That $80 Billion to $100 Billion superfund set up yesterday (an "SIV") just goes to show how these banks banded together, probably with some government incentive since Department of Treasury was involved, to save their skins.  They didn’t want to call it a bailout fund, so we’ll do it for them.

• Wells Fargo’s modest quarter;
• When will the vulture fund come public?
• Lending games continue at Countrywide.
• BankUnited is feeling real pain.

Jon C. Ogg
October 16, 2007