Credit Suisse Equity Research published a report Monday, April 21st, titled “US Large Cap Banks”. In the report, CS analysts Moshe Orenbuch and Jill Glaser Shea take a closer look at the balance sheet of large cap banks including Bank of America Corp (NYSE:BAC), JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Co (NYSE:WFC), PNC Financial Services Group Inc (NYSE:PNC) and Citigroup Inc (NYSE:C).
Large cap banks: Relatively weak revenue growth
Orenbuch and Glaser Shea highlight that all of the large cap banks are suffering from relatively anemic revenue growth. They point out that revenues were flat quarter over quarter with 2% drop in spread income and a decline in fee income among many large banks. Total revenues dropped 3% year over year. Declining mortgage banking activity was one of the major reasons for the decline in fee income.
Dan Loeb's Third Point returned 11% in its flagship Offshore Fund and 13.2% in its Ultra Fund for the first quarter. For April, the Offshore Fund was up 1.7%, while the Ultra Fund gained 2.3%. The S&P 500 was up 6.2% for the first quarter, while the MSCI World Index gained 5%. Q1 2021 hedge Read More
Mortgage banking activity declines
The numbers made it clear that mortgage banking activity continues its downward spiral. “…core mortgage banking revenues declined 22% q/q and down 58% y/y. Origination volumes declined 26% q/q and down 66% y/y which came in a bit higher than the MBA forecast which called for a 23% q/q decline in origination volumes. GOS margins were also under pressure, down an average 23 bps q/q (down 53bps y/y) to 2.1% after rebounding higher last quarter.”