There are 9 US Big Financial Corps with December year ends and with annual pretax earnings north of $5 bil in either 2011 or 2010. Visa, which earned $5.7 bil in its most recent year, wasn't included below because it has a September fiscal year end. Also, Visa won't be releasing its December 2011 earnings until early February 2012.
For the 4Q 2011, the Total Pretax Income of these 9 US Big Financial Corps was up 15%, a deceleration from the earnings growth of every quarter of the last several years.
Below here is the Pretax Income (PTI) or Pretax Loss (PTL) of each of these 9 US Big Financial Corps for the 4Q 2011, and as compared with the 4Q 2010.
..........................................4Q............4Q..........Increase
........................................2011.........2010......(Decrease)
.......................................PTI(L)......PTI(L).....Amount......%
........................................(in millions of dollars)......
Wells Fargo....................6,057........5,165.........892......17%
JP Morgan Chase............4,747........7,012....(2,265)....-32%
Bank of America(1).........3,013.......(1,595)....4,608.....289%
US Bancorp.....................1,855........1,271.........584......46%
American Express..........1,748........1,477.........271......18%
GE Capital Services.........1,720..........896..........824......92%
Citigroup........................1,364........1,060.........304......29%
Morgan Stanley(2)..........1,285........1,191...........94........8%
Goldman Sachs...............1,247.......3,474.....(2,227)....-64%
Total all 9.....................23,036......19,951......3,085.......15%
(1) Bank of America 2011 and 2010 PTI(L) both exclude Goodwill Impairment Charges.
(2) Morgan Stanley 2011 PTI excludes Loss related to MBIA Settlement.
Frankly, I think this 15% 4Q 2011 total earnings growth of these Big 9 Financial Corps is remarkable, given not just the European financial crisis, but just as important, given how the US Congressional Republicans have flat out wreaked havoc on the US economy in the last half of 2011, due to their irresponsible actions in both the Grand Bargain Talks Collapse with the Obama Administration and, in the horrific Debt Ceiling Negotiations, which even resulted in the highly embarrassing US Debt Downgrade by Standard and Poors. And then these US Congressional Republicans piled on by recalcitrantly rejecting on arrival the American Jobs Act, which had some awfully powerful US job creation initiatives, particularly the substantial US infrastructure investments.
But you have to just shake your head at the quality of this 15% total earnings growth for two main reasons.
First, included in Bank of America's 4Q 2011 earnings was a $2.9 bil gain on sale of China Construction Bank shares and a $1.2 bil gain on exchange of trust preferred securities.
And second, and much more substantively, of these 9 Financial Corps, 6 had huge reductions in their Provision for Credit Losses, which totaled $6.6 bil, more than double the total increase in the total Pretax Earnings of $3.1 bil of all of the Big 9 Financial Corps.
Here are these reduced Provision for Credit Losses:
...............................4Q 2011...4Q 2010.....Decrease
..................................(millions of daollars)
Bank of America.......2,934........5,129......(2,195)
Citigroup..................2,874.......4,840......(1,966)
Wells Fargo..............2,040........2,989........(949)
JP Morgan Chase......2,184........3,043........(859)
US Bancorp.................497...........912........(415)
GE Capital Services..1,095.........1,352........(257)
Total all 6...............11,624.......18,265......(6,641)
The Occupy Movement has to be incensed at this assessment by these 6 Big Financial Corps that the credit status of their customers has substantially advanced like this in the past year. The 99% isn't feeling this same increased financial status at all.
This just shows that it is not just Mitt Romney, but also the 1% Big Financial Corps, that are completely out-of-touch with the financial status of the 99%, who are their customers.
And the Occupy Movement has to also be incensed that these greedy Big Financial Corps continue to refuse to write down the principal balance of underwater mortgages, even though they played a major role is causing this massive underwater mortgage situation, which is wreaking havoc on the US economy and US job creation. And the US Government bailed them out after they totally wrecked the US economy.
As long as their accounting is not fraudulent, these Big Financial Corps would not have much in the way of an earnings charge from going the patriotic route and responsibly writing down loan principal balances of the underwater mortgages they hold, because the related Credit Loss Provision should have already been recorded on their books, since US Generally Accepted Accounting Principles already require it, for a substantial portion of the total amounts of these underwater mortgage amounts.
And what is Republican Presidential Candidate Mitt Romney's solution to solving the horrible underwater mortgage mess? Let the underwater homeowner drown, he proclaims.
Also, these massive reductions in Provision for Credit Losses in the past several years reveal the extent of the massive pullback in loans, except to almost risk-free borrowers, by these incredibly greedy Big Financial Corps. Small businesses unable to obtain loans at a reasonable interest rate have to be incensed. This freezing up of the loans to small businesses by these Big Financial Corps have wreaked havoc on the US economy and on US job creation.
And these Big Financial Corps are not making these loans to small businesses even though the US Government has provided funding to them at incredibly low interest rates, very close to zero percent.
And the Occupy Movement has to be just incensed with the massive across-the-board profit increases subsequent to the financial meltdown of nearly all of the Big Financial Corps, driven in part by the sky-high interest rates and late fees charged on credit cards loans made to the 99%.
But something needs to be said about the extent of the common stock buybacks, and other financial engineering occurring here.
JP Morgan Chase had the following operating results for annual 2011 and 2010:
Pretax Income in annual 2011 of $26,749 mil, up 7.6%
Net Income in annual 2011 of $18,976 mil, up 9.2%
Earnings Per Share in annual 2011 of $4.48, up 13.1%
So what going on with the favorable spread between these growth rates?
Well, like just about every other US Big Corp, JP Morgan Chase is using tax strategy to continually reduce its effective income tax rate, thus its Net Income grows more quickly than its Pretax Income.
But look of the huge spread on the Net Income growth vs. the Earnings Per Share growth.
That's caused by common stock buybacks, which the US Government is financing by letting JP Morgan Chase borrow money from them at nearly zero percent.
These common stock buybacks reduce the number of common shares outstanding and thus increase EPS.
And EPS is what drives stock prices and the majority of the high level executive compensation.
How extensive were JP Morgan Chase stock buybacks?
Well, in 2010, they were $2.3 bil.
JP Morgan hasn't disclosed its cash flow statement for annual 2011, but for just the first 9 months of 2011, its common stock buybacks totaled $8.0 bil. I'm not kidding.
On March 18, 2011, JP Morgan Chase's Board of Directors approved a massive $15.0 bil of common stock buybacks, $8.95 bil of which could be made in 2011.
And it's not just JP Morgan Chase.
US Bancorp's Pretax Income for annual 2011 was $6,628 mil, an increase of a huge 58% over 2010. So they are getting this massive earnings increase from the 99% and from the US Government by near zero interest rate borrowing, but how have they shared this incredible financial largesse with the 99%? Well, they haven't. They still refuse to reduce the principal balances of their underwater mortgages.
Citigroup's Pretax Income for annual 2011 was $14,899, a 13% increase over 2010. So they are getting this very nice earnings increase from the 99%, including from unreasonably high interest rate and late charge fees on credit card loans, and from the US Government by near zero interest rate borrowing, but how have they shared this incredible financial largesse with the 99%? Well, they haven't. They still refuse to reduce the principal balances of their underwater mortgages or to lower their sky-high credit card interest rates and late fees.
GE Capital Services' Pretax Income for annual 2011 was $7,452 mil, up a massive 264% from the $2,048 mil earned in 2010. A substantial portion of this massive earnings increase was from the 99%, including small businesses. Also, the US Government has substantially helped GE Capital Services by providing an extremely low interest rate cost of funding. In return, what has GE done to help the 99% and the US Government? They haven't done anything. Not only have they shed thousands of US jobs, they also haven't paid any US federal income taxes in total for many years.
American Express' 2011 annual Pretax Income was $6,956 mil, a robust 17% increase over 2010, driven by very high credit card fees and interest rates charged, both on the 99%, including small businesses. Its 2011 annual Net Income was $4,899 mil, up an even more robust 21% over 2010. This higher after-tax Net Income percentage growth was caused by shrewd income tax engineering.
San Francisco-based Visa's year ended September 2011 Pretax Income was $5,656, up a very strong 22% over the prior year, driven by extremely high interest rates and late payment fees on their credit card loans, substantially with the 99%. Visa's Earnings Per Share growth was an even higher 29% in 2011, due to its substantial stock buyback program. In 2010, it paid $1.0 bil on stock buybacks. This was doubled in 2011 to $2.0 bil.
And lastly, San Francisco-based Wells Fargo's Pretax Income for annual 2011 was $23,656 mil, an increase of 24% over 2011. Its Net Income for annual 2011 was $15,869 mil, a much higher increase of 28%. Why the spread? It's all about shrewd, clever-by-half income tax engineering.
On March 18, 2011, Wells Fargo's Board of Directors authorized an additional 200 mil common shares to be repurchased, which at the current stock price of Wells Fargo, would amount to more than $6 bil of stock buybacks authorized.
And the 1% want to know why the Occupy Wall Street Movement has been so intense? And also why the volume of this protest has been raised up so much on the West Coast?
