So January and February were great at Citigroup Inc. (NYSE:C), according to a March 20 leaked memo from CEO Vikram Pandit. Then fast forward to last Friday, when President Obama gathered the heads of the major banks, presumably for a long chat. Jamie Dimon, the chief of rival J.P. Morgan Chase & Co. (NYSE: JPM), in a post-meeting interview on CNBC sang a very different tune about March, saying it had not been as good as the prior two months. But why?
Some have suggested that the banks were buffeted in January and February by American International Group Inc. (NYSE:AIG) counterparty payments from the unwinding of collateralized debt swaps. Certainly that will have an impact on their bottom line in the first quarter.
However, it is possible that Dimon was simply managing expectations.
After Pandit's comments, the markets started to bounce back, but as the quarter comes to a close, perhaps Dimon realized -- after looking at his own books -- that Pandit's optimism may have given the public and markets a false hope that there would be no more losses at the banks in the first quarter. Any realist knows that is highly unlikely given the ongoing default rates of mortgages and other loans. After all, the banks are likely profitable before they have to mark to market those bad assets on their books at the close of each quarter.
So Dimon simply may have been attempting to send a signal to the markets to expect more bad news in April. - Matthew Wurtzel
See related post from Clusterstock
See related post from Asia Times' InnerWorkings blog
See related post about AIG counterparties from Dealscape
See Pandit's memo from Dealscape
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