TheStreet.com's Jim Cramer explains why this poor earnings report is such a crushing blow. Yep, Merrill Lynch (NYSE: MER) (Cramer's Take) messed up, for certain. We had no idea how bad things were. They just gave us no signal. Devastating.
Citigroup (NYSE: C) (Cramer's Take)? We all knew that Prince was a pathetic risk manager. Check that, Bob Rubin and the Crown Prince don't think so, but the rest of the world does. So the fact that Citigroup needs to talk to Bob Steele at Treasury to save itself isn't all that shocking.
Wachovia (NYSE: WB) (Cramer's Take)? I thought it was more conservative than this. Then again, it bought Golden West at the top and even that great lender succumbs in this horrid environment.
But the one that really hurts, the big surprise, is Bank of America (NYSE: BAC) (Cramer's Take). To me this bank had been doing everything right, tight standards, good national growth rollout, fantastic research, good solid banking.
Suddenly, I feel that everything's on the table after that quarter. It just really blew it in lending and trading and investment banking, in mortgages, you name it.
Fortunately, of these four, Band of America could come back the fastest. Ken Lewis is no-nonsense. Anyone who disappointed will be forced out. He will review and slice and crush, as we see already. But it is the one bank that I know I had been telling people had the real growth you want out of a bank. The one that would not be a value trap. And given the fact that there were no more banks it could buy, I figured now would be when it would just return dollar after dollar to shareholders in buybacks and dividends.
I think it still will.
But after this quarter, sadly, there will be fewer dollars to give back and I just don't know how they are going to grow as fast as everyone else any more.
To me it looks like, right now, we may have lost the best bank ATM out there.
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Jim Cramer is a director and co-founder of TheStreet.com. He contributes daily market commentary for TheStreet.com's sites and serves as an adviser to the company's CEO. At the time of publication, Cramer was long Citigroup.
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Reader Comments (Page 1 of 1)
10-25-2007 @ 10:58AM
hopflcd said...
Bad Bank Managers. All of these bankers come from the same club, worship the same bonuses, knew the dangers they were getting into but did not care as long as the bonuses were there, will get away with all the bad investments while s/h's, depositors, and the general public suffer. No government interference. They are all from the same club. Where are the candidates for President on this issue. Sadly, there is even little comment from the Democrats. Charles Hopfl
10-25-2007 @ 11:29AM
Max said...
Yes, BofA posted very (to put it lightly) disappointing results last quarter, but I am still willing to give them one more chance. I'm a big believer in the old adage, "If you learn from a mistake then it is not a mistake, it is a lesson"....and I think BofA learned a big lesson here. Plus, with all of their mergers and acquisitions BofA has some pretty impressive talent (take a look at some that talent http://www.newsvisual.com/newsvisual/2007/03/bank_of_america.html ), so I wouldn't count them out just yet.
10-25-2007 @ 11:37AM
R HUDNETT said...
I knew they were going to get in big trouble by having foriegn minority loan officers giving loans to non documented illegals, how did cramer not see this one coming !!!
10-25-2007 @ 2:19PM
jnalband said...
Jaime Dimond at JP Morgan Chase, was the only one that wasn't fooled or blinded to the real situation. I am so surprised at BOA.
jn
10-25-2007 @ 2:53PM
Jennifer said...
When banks turn down business loans, the loan sharks step in. So called "funding companies" are charging restaurants and businesses 38%, 48% and even...get this...55% interest on loans. If that isn't pillage I don't know what is. These funding companies pay out huge cash incentives, or 'carrots' to their sales force to bring in business. And it's totally unregulated. So Banks lose business, while Usurers laugh their way to the bank...who said there's no free lunch??
10-25-2007 @ 3:30PM
mcconnell said...
Let me get this straight Cramer, all the banks and mortgage lenders are idiots, they all got it wrong, must be their fault. Not the fault of the Fed's PHD thinkers that kept rates so low for so long and then raised them sixteen times straight. The learned thinkers at the Fed didn't know about CRA Community Redevelopement Act) that they crammed down bankers and lenders throats? They didn't know lenders were giving adjustable rate mortgages that reset? They didn't put two and two together than when they raised rates without stopping to let the effects settle in gradually and gauge the effect of the rate rising spree, when they did all this that it would not have a negative effect on home prices and repayments? Now tell me again who's the idiot and who didn't get it right?
10-25-2007 @ 3:40PM
wildbill said...
As to Cramer not seeing this coming - well, neither did Greenspan, Franks, Poulson,Bernanke and every other pundit on Wall St. Worse, they still do not have a handle on the situation. I wish all would apply a little "common sense", just as Thomas Paine suggested in the pamphlet of the same name. If one takes a look at the massive amount of construction that has taken place and is still on-going you will quickly realize that the U.S. alone did not have the funding for something of this scope. So, where did the money come from? Well, we do have a clue. The U.K.'s Northern Rock is in the same (or worse) in exposure to the faltering housing market. Since there are about 560 banks in London that leaves 559 more to "fess up". They all have to do so in accurate year end audit on Dec. 7. If there is a lot of red ink the "Q's" will start on Mon. Dec. 10. We will just have to wait and see.
10-26-2007 @ 9:30AM
Jim said...
There are only two reasons for me to remain a BofA shareholder, and neither is ironclad: (1) the 5% dividend which they have not yet reduced, and (2) I have lost about 8% and don't think they may be nearing the bottom. This decision is under DAILY review.
10-29-2007 @ 9:09AM
RON SKAGGS said...
Some of this may be Backlash. I know I won't use BOA for anything since they became "Bank of Amigo".
10-31-2007 @ 2:56PM
R. Padfield said...
BofA gave a poor showing at best. The CEO is responsible for knowing what is going on in the business and making it profitable for the shareholders. All the signs were there and that is why I voted against retaining the CEO at the last shareholders meeting. Now maybe the rest of the shareholders will listen and act. Give him the boot!
Bob P.