Equity markets had another solid week with all the major indices on the upside.  Monday’s market brought a positive conclusion to January even in the midst of geopolitical turmoil in Egypt.  The Dow Jones Industrial Average closed at 11891.93 or a gain of 2.7% for the month which represented the first advance for the month in four years and the best month in 14 years for the DJIA.  The S&P 500 gained 2.3% in January which was the first increase since 2007. 

Most of the strength for Monday came from a strong earnings report from Exxon Mobil.  Alcoa also helped the Dow with a 2.7% increase.  Crude oil prices rose to $92 per barrel on the turmoil in Egypt.  While they are not oil producers, concerns …

The markets were a bit depressed this shortened holiday week with Wednesday being the most active day in terms of news.  After being closed Monday for the holiday, the markets reopened with renewed nervousness about the U.S. economy.  European debt concerns also reared their ugly head Tuesday and the Dow Jones Industrial Average closed down 107.24 points or 1% on thin volume. This broke a 4-day rally which had added 4.4% to the Dow. Global concerns caused the Euro to drop sharply Tuesday. 

Financials strengthened Wednesday to help the DJIA gain back 45.32 points.  It was a rocky day, however, with the markets experiencing a strong start which fizzled after the speech by President Obama on the economy where he stated that the economic recovery was “painfully slow.”  The Federal Reserve Beige Book report was also a damper on the markets.  While it showed some signs of moderate economic growth across the 12 districts the general tone was …

I have had a number of recent conversations with bankers regarding quarter-end asset valuations related to “Other Than Temporarily Impaired” asset concerns. Auditors are once again leaning on banks to aggressively recognize impairment charges on a host of financial assets held in portfolio.

I want to put into perspective the credit markets as related to asset valuations and historical cycles. My theory is that financial assets in the portfolio are not impaired permanently, only temporarily. I offer a 20-year history of swap spreads as evidence. Swap spreads are used as a proxy for all credit spreads, particularly for financial companies, as most bank funding rates, including FHLB advances, are based on swap spreads. The chart below this article (source: Bloomberg) shows the history of swap spreads since November 1988, a period covering almost 20 years. During this time there have been three distinct periods of distress in credit markets, including the …

In the wake of a tumultuous year for banks and bank stocks, rumblings of some positive trends for bank earnings are beginning to surface.  I’m hearing from a few regional banks that this summer’s global repricing of credit has already proved beneficial, as new loan volume in August carried wider spreads for the first time in a long time.

One month does not a trend make, but the increase is good news for regional banks dependent on spread income (and which ones aren’t?) My anecdotal information comes from banks and thrifts between $3 and $10 billion, in the mid-Atlantic region, institutions heavily reliant on commercial real estate lending with limited exposure to exotic mortgage risk; traditional 30 and 15 year fixed rate mortgages, but none of the products we’re already tired of hearing about.

How have the global problems trickled down to smaller regional banks so quickly and …