Sleight Of Hand Accounting Boosts Jpmc.

In two short years, the banking behemoths in the United States have spectacularly turned their fortunes around

. Despite being part of an industry that was, by all accounts, receiving its last rites, theyre back earning the kind of quarterly profits they grew accustomed to before the events of 2007. JP Morgan Chase managed to post a particularly impressive Q2 profit of $4.8 billion even though its revenues fell by 8%.

Such mouth-watering profits could understandably tempt some investors to buy JPMC stock especially given they were achieved in such a horrendous trading environment exacerbated considerably by seemingly being the perennial focus of US President, Barack Obamas ire.

Mann International warns against such a speculative foray into the market. Its reasoning centers on several factors;

Firstly, JPMC results look impressive because it cut its "provision for credit losses" by two thirds, from $9.7bn to $3.4bn. Put simply, the bank decided that it doesnt have to set aside as much money to cover bad debts thanks to the improvement in the economy.

Secondly, there's 'mark to model'. In a nutshell, this allows banks to put arbitrary values on their assets that are invariably higher than a true market price. That difference, in turn, can be added back to boost profits.

The global economy is set to turn downwards again and banks, especially those in the US and the UK, will face further trials as residential and commercial property loans turn sour. Consumers will inevitably suffer and so will the banks that granted them credit cards and loans.

Although the news may not make the front page of your daily newspaper, some 90 US regional banks have gone to wall already this year and, with the threat of a double-dip recession looking more ominous by the week, there are bound to be more. Mann International analysts suggest that, rather than buying bank stocks, one should really be looking to sell them into the temporary strength they currently enjoy.

by: Josh Phillips

POST COMMENT

How To Identify Ruby Natural Or Man-made Federal Reserve Launches Qe1.5. Castilla La Mancha Cravings Don't Have To Rule You – Here's How To Rule Them! Figueres Accepting Where You Are Galicia- A Visit In Galicia Should You Use Chain Link Fencing Panels For Chickens Monuments In Granada Monuments In Zaragoza How To Make A Rakhi Monuments In Palma O TRÂNSITO EM RONDONÓPOLIS E O "GLOBO DA MORTE"