The first two big banks reported earnings, and there were several red flags that investors did not like. Bobbi Rebell reports.
Investors not happy with the first look at bank earnings. High legal costs sank profits over at top bank JP Morgan Chase. Morningstar's Jim Sinegal: SOUNDBITE: JIM SINEGAL, EQUITY ANALYST, MORNINGSTAR (ENGLISH) SAYING: "JPMorgan actually had more in legal costs this year than it did last year. 21:19 and I think to some extent its hard to be patient with these banks. This situation has been going on for 5,6,7, years now I think people are just really getting tired of waiting for it to end. " Sinegal agreed with CEO Jamie Dimon's assertion that the banks were under assault: SOUNDBITE: JIM SINEGAL, EQUITY ANALYST, MORNINGSTAR (ENGLISH) SAYING: "I think you know in the past quarter the capital requirements on JPMorgan for example were raised and it's emblematic of this phenomenon where there is one more issue. Just when you think the banks have raised enough capital, the capital requirements are raised. I think they are going to continue to be under attack for some time now. They are easy targets." Shares fell on the news, as did those of rival Wells Fargo. The #4 bank by assets reported a slight increase in quarterly profits- but one of the banks fastest-growing industries in its loan books has been energy- an issue the company downplayed but S&P Capital IQ's Eric Oja is watching: SOUNDBITE: ERIC OJA, EQUITY ANALYST, S&P CAPITAL IQ (ENGLISH) SAYING: "The banks that have the higher proportion of capital markets for lending to drillers especially drillers, especially drillers that depend on 80, 90 dollar oil those banks will be hurt in terms of loan growth. In terms of credit quality that won't happen right away. That will be further out. That will only happen if the price of oil stays where it is right now in the mid 50's dollar range." The upside is that consumers are saving money at the pump- which helps credit quality- an area that in turn benefits the banks- including Wells Fargo- where credit cards have been a growing business.