Friday, January 15, 2010

JPMorgan leading the market lower. Reports Q4 return on assets of .65% (JPM)

JP Morgan is off 2% today, as they continue to increase expectations for loan losses.

I'm comforted that they are being more conservative than their industry peers in terms of reserves:

...And yet I will never be too keen on banks like this.  The leverage involved is simply astonishing, leading to JPMorgan's q4 return on assets of .65% and .58% for the full year:

Below is a chart of the S&P500 sectors and their respective Return on Assets.   The recent data is skewed by various non cash charges and write downs, so I included the 10year maximum for each sector.  Financials are at the very bottom, but this doesn't even illustrate the tiny margins at the big banks.  Included in the Financials are various other entities (REIT's, ratings agencies, brokerages and exchanges) with MUCH higher ROA's.  The 10year max ROA average for both regional and national banks and S&L's is 1.6%, a number that would get management fired at any other institution.  No, I'm not saying it's appropriate to compare ROA's in baning to those of other industries.  But next time your hear a bank CEO discuss his Return on Equity, take it with a grain of salt...

Copyright 2010 AlphaNinja

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