The Institutional Risk Analyst

LC is clearly succeeding where the larger banks are not in terms of both loan originations and loan sales, which are shown in the chart below. If LC can continue to create assets and also sell loans to investors, that is an indication of a healthy business. But the big question for us is how much of the consumer lending opportunity can LC capture and retain? The table below shows the gross loan yield, net loss rate and net income vs average assets for LC and its bank competi

Of note, JPM's CFO Barnum said in response to a question that “I haven't heard anything to suggest that the private [credit] deals are performing differently from the public deals. It probably is true at the margin that some of the new direct lending initiatives involve underwriting at slightly higher expected losses, and that's significant because, as we've been discussing here, the wholesale charge-off rate has been very, very low for a long time."

The surprise pre-release of Q4 results led to a significant drop in JPMorgan's stock price and took down the entire sector along with it. But is this the only negative surprise likely to come from JPM? We think not. CNBC’s Jim Cramer said on X yesterday that investors should buy JPM on the dip, but we disagree. In fact, the markets seem to know something about JPM. Maybe this explains why Citigroup (C) has outperformed the House of Morgan all year.

We have published the latest edition of The IRA Bank Book for Q4 2025. Entitled "Defaults Fall, Market Risk Grows," the report details how indicators of consumer credit risk are falling even as risk to financial markets from institutional and commercial credit, crypto tokens and market exposures grow. Bank income has reached record levels in Q3 2025, but what happens in Q4 2025 and 2026?

“Moynihan is trying to demonstrate that the business can grow and hedge funds different investors in stock want price appreciation not just dividend. The decision to host the investor day was made long ago - JPM does it every year. Jamie Dimon has taken away the excuses of big banks that they can’t grow.”

Is the impending ZoMa administration in NY City Hall any worse than the devastation caused by the 2019 Housing Stability & Tenant Protection Act of 2019? We think that the panicked crowd of New York landlords and developers have greatly exaggerated the impact of ZoMa, who is a slick salesman but has even less substance that the disastrous Mayor Bill de Blasio. 

In this edition of The Institutional Risk Analyst, we ponder the world of credit and investing as sovereign nations see their debt ratings sinking below that of global corporations. Meanwhile, the price of gold is reaching new highs. Then we set up the Q3 earnings of the top-seven US depositories for subscribers to our Premium Service as we surge into quarter end with equity markets at all-time highs and global central banks turning the money spigots wide open.

PNC went down less in April, but then lagged the leaders in our bank test group, not exactly a rousing vote of confidence in the $550 billion bank. The acquisition of FBHC may not help. The traditional rule of thumb in banking is that paying anything more than 1.25x book for a bank is usually not recovered.  We do not have a position in PNC.

The largest bank loan portfolio increases reported by the FDIC were in loans to non-depository financial institutions and broker-dealer loans to purchase or carry securities, including margin loans. This situation is inherently unstable.

SOFI is up almost 300% while the Bitcoin futures traded on the Chicago Mercantile Exchange are up less than 100%.  Below we provide some thoughts on the banking group as we head into September. 

Whalen Global Advisors LLC (WGA) has published the latest edition of the WGA Top 50 Banks, the fifty top performing large commercial banks in the US. Drawn from the members of Peer Group 1 and other sources, WGA screens the group based upon five proprietary measures of financial and market performance.

If we told you that large cap financials are outperforming both the S&P 500 and bitcoin over the past month, what would you say? 

We noted in the most recent IRA Bank Book that the Q1 2025 banking industry data from the FDIC was showing improvement in certain commercial line items, particularly non-owner occupied real estate. But is this another head fake by desperate banks trying to conceal rancid commercial real estate exposures?

Even a small decrease in prepayments due to higher LT interest rates could significantly impact the fair value of the Bank of America mortgage portfolio, forcing unrealized losses higher. If LT rates continue to rise, one veteran banker told The IRA yesterday, then BAC and several other large banks are going to start to literally shake apart from unrealized losses on COVID era assets.

Some of the smaller holders of MSRs may ask themselves if selling right now is not the best strategy over a 36-48 month horizon. 

If we consider the larger picture, we already have years of pent-up credit expenses awaiting realization, but add to the sauce Donald Trump.

Private equity portfolio companies are about 10 times as likely to go bankrupt as non-PE-owned companies.

Yes, net loss rates in percentage terms post default are back up to 2010 levels, but the dollar volume of net charge-offs remains very low.

Citi seems to be tracking the group now, whereas pre-COVID the stock significantly underperformed in terms of market beta. But performance?

The banking industry has segmented into a handful of above-average performers and JPM is the largest leader of these "winners"