Financial Industry 07 (Jul 18 - Dec 25)

[behappyalways]

Bank deposits tumbled by $79.2BN in last week (SA), biggest drop since March 22 as deposit flight returns.

Unadjusted, deposit drop was even bigger: $86.6BN

https://twitter.com/zerohedge/status/16 ... 4093725701

[winston]

Big US banks would lose $541bn in doomsday scenario, predicts Fed

by Joshua Franklin, Stephen Gandel and Colby Smith

The largest US banks would lose $541bn in a hypothetical doomsday economic scenario but still have more than enough capital to absorb the losses.

The passing grades given by the Fed on Wednesday to banks including JPMorgan Chase and Goldman Sachs lent support to claims from Wall Street executives and regulators that systemically important banks can withstand heavy losses.

Source: Financial Times

https://finance.yahoo.com/m/6636fa76-02 ... -lose.html

[winston]

China: CMB Blasts G Sachs' Research Report as Logically Wrong & Misleading Investors

Goldman Sachs recently downgraded a number of Chinese banks in its research report.

The investor relations department of China Merchants Bank (CM BANK) issued a statement on this issue, saying that Goldman's judgment had misled some investors and caused them to worry about the asset quality of the bank and urged the broker to clarify the situation, Cailian Press reported.

Related News; BOCI Foresees CM BANK (03968.HK) 1H NP to Hike 9% YoY, Rating Buy

CM BANK's statement said that the Goldman Sachs' research report on China Merchants Bank had several issues, including incorrect calculation logic and incorrect data, on local government financing platform debt.

For example, Goldman Sachs projected CM BANK's financing of government platforms to be about RMB1 trillion but that by the end of 2022, the bank's on-balance sheet loans were only RMB132.564 billion, accounting for only 2.32% of its total loans, and its investment in platform bonds was very small.

Source: AAStocks Financial News

http://www.aastocks.com/en/stocks/news/ ... -news/AAFN

[behappyalways]

Regional Banks Rally After Fed Proposes Higher Capital Requirements For Smaller Banks
https://www.zerohedge.com/markets/regio ... ller-banks

[winston]

China banks under pressure as local debt crisis mounts

Goldman Sachs report downgrading five banks with high LGFV exposure has driven down shares and raised systemic risk questions

By JEFF PAO

Large Chinese banks are under pressure from Beijing to sacrifice their margins and extend new loans to cash-tight local government financing vehicles (LGFVs).

Bloomberg reported that state banks have in recent months been offering LGFVs loans with a maturity period of 25 years, instead of the normal 10 years.

Some of the loans came with waivers on any interest or principal payments for the first four years, though the interest will be accrued for later payment.

Source: Asia Times

https://asiatimes.com/2023/07/china-ban ... 340db87eb1

[behappyalways]

Bank credit at lowest levels since the Great Recession. Still 90%+ chance of a Fed hike at end of month.

https://twitter.com/GarethSoloway/statu ... 1863399442

[winston]

Chinese banks face mortgage pressures

Chinese banks' profits may take a hit as policymakers urge lenders to lower the refinancing costs on US$5.4 trillion (HK$42.1 trillion) worth of home loans, adding pressure on the sector to help revive the nation's flagging economy.

People's Bank of China official Zou Lan said that the central bank has encouraged lenders to renegotiate mortgage contracts or extend new loans - a move seen as negative for banks' margin and earnings by brokerages including JPMorgan Chase and China International Capital.

Zou's comments may "open the door for mortgage refinancing" and "eventually lower the lending rate for the existing mortgage book in China," JP Morgan analysts said. "In a worst case scenario that 100 percent of the mortgage back book is refinanced with a rate reduction of 60 basis points, the impact on 2024 net interest margin and earnings would be -7 basis points and -8 percent, respectively."

Some Wall Street analysts are also wary of growing risks associated with the debt-laden local government financing vehicles, with Goldman Sachs saying the lenders' exposure to LGFVs could hurt earnings and lead to lower dividend payouts.

"Large state-owned banks could suffer a bigger impact given their higher mortgage exposure of 28 percent of total loans," CICC analysts said.

Source: Bloomberg

https://www.thestandard.com.hk/section- ... -pressures

[winston]

The banks are "heads they win, tails they win" businesses.

When times are unstable over the past fifteen years, they've been backstopped by the Fed (de-risked), and incentivized to fuel credit creation to help the economy -- from which they make money in loan origination, investment banking and trading.

When times are more stable, their customer account balances balloon (as they have now), from which they get to earn a very healthy interest rate spread from the rising interest rate environment.

Source: Billionaire's Portfolio

[behappyalways]

US Bank 'Jog' Is Back - Deposit Outflows Soar Most Since SVB
https://www.zerohedge.com/markets/us-ba ... r-most-svb

[behappyalways]

Whoever thinks that the Fed’s tightening isn’t having a big impact, and that it needs to ramp up its tightening even further, hasn’t been looking at bank credit, which is on the verge of turning YoY negative.
https://twitter.com/steveanastasiou/sta ... 2798442496