Any views on financials/banks?

kmiklas

kmiklas

They've been taking a hit, but will they keep plunging?

- Rates are low, so they make less profit on everything.
- Forbearance on payments of all types (rent, mortgage, lease, etc), for both retail and commercial clients have hurt their cash flows
- Generally, their lenders are having trouble making payments

Of course, they have Uncle Jerome cutting checks to them every day.

Discuss?
 
The ones from 600m cap to 2B, around 80% of them did really in the last 10 years.

People ain't gonna change, fish for the gold (fish for a bitcoin...), any time soon, so they should be ,,ok'' (?)

But the ones of such size, can forget about bailouts.
If they're cooking books or bunch of triple A cdo's alternatives, nah nah, Uncle Sam ain't coming.
 
Stocks are not my thing, but if they were I'd go with relative strength as a starting point.
And banks ain't where its at currently unless I was looking to short.
 
kmiklas said:
They've been taking a hit, but will they keep plunging?

- Rates are low, so they make less profit on everything.
- Forbearance on payments of all types (rent, mortgage, lease, etc), for both retail and commercial clients have hurt their cash flows
- Generally, their lenders are having trouble making payments

Of course, they have Uncle Jerome cutting checks to them every day.

Discuss?
More...


according to a forbes article they were "ready" this time for crisis, apparently financial crisis are a result of any crisis so they got ready, i am long WFC yesterday at 22 support line Jan 2022 calls, their dividend is attractive even if cut into half
 
systematictrader said:
according to a forbes article they were "ready" this time for crisis, apparently financial crisis are a result of any crisis so they got ready, i am long WFC yesterday at 22 support line Jan 2022 calls, their dividend is attractive even if cut into half
More...
High dividend is a negative for long call?

One of the secular trends I watched during the past crisis was banks lived on interest they charged for loans. With rates near zero for the foreseeable future, banking profits will be weak for a while. Added to that folks are having trouble making loan and mortgage payments I think the outlook for banking stocks are not encouraging.

In March, I switched all my banking stocks/options over to tech and Pharma stocks/options. It was really just a hunch and I cannot explain it if you ask me.
 
the street, public still seem to have a love affair with equities like amazon and tsla etc.netflix and paying high earning multiples for them they are holding onto their shares like some concert ticket, they love it.and cannot get enough of it. like stock fanatics.
 
kmiklas said:
- Rates are low, so they make less profit on everything.
- Forbearance on payments of all types (rent, mortgage, lease, etc), for both retail and commercial clients have hurt their cash flows
- Generally, their lenders are having trouble making payments
More...

There are only a handful of banks that directly originate loans. For the most part they are originated through third parties and handed off to fannie mae. More and more "alternative mortgage lenders" are popping up. Rocket mortgage comes to mind. I don't think banks are willing to, or literally, take on the risks they used to. These alternative lenders make their money primarily from origination and closing costs and pass the risk to whoever is sponsoring them (FNMA, US Bank, BofA, etc).

Rates are absurdly low right now but supply will dwindle. This will necessarily cause an increase in housing cost (i.e. more profit) at some point. 2.5% on money you're paying 0.25% for is pretty damn good. More over the yield is probably closer to 3.5-4% for your average mortgage buyer. This would give them (using the 0.25% number) a spread of up to 3.75%. Not too shabby. If you can keep pumping mortgages out you can make more with origination fees and sell chunks of the debt off to help spread the risk.

To put it more bluntly all you're doing is originating the dog shit loan and packing it in a bag full of other dogshit. Then you sell it to people as "top tier organic fertilizer" instead of dogshit at a premium to get your capital back plus some profit and originate another billion worth of dogshit loans with dirt cheap fed money. You're only paying 25 basis points (in our example) to do this over and over again. Think of it like selling deep OTM puts with your dad's retirement account except you get to keep the money and drink his beer. Rinse, repeat.

You can typically purchase chunks of an MBS through FNMA with as little as $40,000. Depending on the mortgage composition you could see pretty good returns (Schwab has one right now through FNMA with an 11% coupon 2038 maturity but it's tranches are absolute dog shit).
 
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ironchef said:
High dividend is a negative for long call?

One of the secular trends I watched during the past crisis was banks lived on interest they charged for loans. With rates near zero for the foreseeable future, banking profits will be weak for a while. Added to that folks are having trouble making loan and mortgage payments I think the outlook for banking stocks are not encouraging.

In March, I switched all my banking stocks/options over to tech and Pharma stocks/options. It was really just a hunch and I cannot explain it if you ask me.
More...

i think they are prepared for that

long ditm call sort of a third ditm instead of
The stock outright
Basically almost delta one
Not much time value
 
too many bad loans in their books.
loans are assets to banks.
oil sands companies they lend
retail bankruptcies, real estate mortgages or loans..
not good as their assets lose value so will their equity as equity value is dependent

Loans are assets in the banks balance sheets

Banks want you to just keep paying them interest on the loan.

ASSET value - liability == equity
 
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