Martin Weiss at Weiss Research called the surge in earnings "bogus," and a result of tricks including an easing of mark-to-market accounting rules.
WASHINGTON (AFP) - - A string of surprisingly strong earnings reports suggests US banks are emerging from a near-death experience, but some analysts say the troubled sector faces more pain.
Bank of America on Monday joined the parade of financial firms reporting robust results -- a profit of 4.2 billion dollars in the first quarter, beating its performance for all of 2008.
Last week, Citigroup, JPMorgan Chase and Goldman Sachs all topped expectations with strong profits, a hopeful sign for an industry critical to recovery from the severe recession. Wells Fargo said its results would show "record" profits in the January-March quarter.
"The banks are benefitting from a jump in mortgage refinancing as well as the fact that with interest rates so low, they are able to borrow cheaply and therefore profit more from lending," said John Wilson at Morgan Keegan.
"It ought to be difficult for a bank not to make money in this environment."
Although Citi managed to show a profit of 1.6 billion dollars in the first quarter after losses of more than 18 billion in 2008, some analysts were unimpressed.
Citi's results included "several one-time items which muddied the waters in assessing the franchises underlying performance," said Goldman Sachs analyst Richard Ramsden.
Some analysts say that below the surface, banks are still fragile and may face another round of deep problems ahead, especially if the economy remains weak.
Goldman Sachs, for example, received nearly 13 billion dollars from AIG before it posted a quarterly profit of 1.8 billion dollars.
"In the case of Goldman, the AIG payments dwarfed the positive earnings," said Bob Eisenbeis, economist at Cumberland Advisors. "That's the reason that people are justifiably skeptical about these earnings."
Eisenbeis said banks "have every incentive to squeeze a lot of positives into this quarter" to end the vicious cycle of falling asset and stock prices that has led to a death spiral for some institutions.
Some skeptics say AIG, which has gotten a US government bailout worth some 180 billion dollars, is being used to "funnel" cash into the banking system.
"Anybody owed money by AIG got bailed out 100 cents on the dollar, and some people don't thing that is fair," Leahey said. "But you cannot not avoid paying 100 cents on the dollar without going to bankruptcy court."
"If you didn't help AIG, then AIG would not be able to pay off the banks, and we would be stuck with a collapsing banking system," he said.
Brusca said it remains unclear how much AIG has helped the bottom line of the banks because earnings reports lack such details.
"We know the banks are very impaired, they have a lot of problems," he said. "And we know they will get worse as long as the housing problems get worse."
WASHINGTON (AFP) - - A string of surprisingly strong earnings reports suggests US banks are emerging from a near-death experience, but some analysts say the troubled sector faces more pain.
Bank of America on Monday joined the parade of financial firms reporting robust results -- a profit of 4.2 billion dollars in the first quarter, beating its performance for all of 2008.
Last week, Citigroup, JPMorgan Chase and Goldman Sachs all topped expectations with strong profits, a hopeful sign for an industry critical to recovery from the severe recession. Wells Fargo said its results would show "record" profits in the January-March quarter.
"The banks are benefitting from a jump in mortgage refinancing as well as the fact that with interest rates so low, they are able to borrow cheaply and therefore profit more from lending," said John Wilson at Morgan Keegan.
"It ought to be difficult for a bank not to make money in this environment."
Although Citi managed to show a profit of 1.6 billion dollars in the first quarter after losses of more than 18 billion in 2008, some analysts were unimpressed.
Citi's results included "several one-time items which muddied the waters in assessing the franchises underlying performance," said Goldman Sachs analyst Richard Ramsden.
Some analysts say that below the surface, banks are still fragile and may face another round of deep problems ahead, especially if the economy remains weak.
Goldman Sachs, for example, received nearly 13 billion dollars from AIG before it posted a quarterly profit of 1.8 billion dollars.
"In the case of Goldman, the AIG payments dwarfed the positive earnings," said Bob Eisenbeis, economist at Cumberland Advisors. "That's the reason that people are justifiably skeptical about these earnings."
Eisenbeis said banks "have every incentive to squeeze a lot of positives into this quarter" to end the vicious cycle of falling asset and stock prices that has led to a death spiral for some institutions.
Some skeptics say AIG, which has gotten a US government bailout worth some 180 billion dollars, is being used to "funnel" cash into the banking system.
"Anybody owed money by AIG got bailed out 100 cents on the dollar, and some people don't thing that is fair," Leahey said. "But you cannot not avoid paying 100 cents on the dollar without going to bankruptcy court."
"If you didn't help AIG, then AIG would not be able to pay off the banks, and we would be stuck with a collapsing banking system," he said.
Brusca said it remains unclear how much AIG has helped the bottom line of the banks because earnings reports lack such details.
"We know the banks are very impaired, they have a lot of problems," he said. "And we know they will get worse as long as the housing problems get worse."
