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Brad Hintz: Key Takeaway from JPMorgan Earnings

The first of the big banks to report third-quarter earnings, JPMorgan Chasebeat analysts' estimates Wednesday thanks to lower loss provisions.

While the banking giant posted a $4.4 billion profit, it said revenues were down and expenses were up. Although consumers spent more on their credit cards, the nation's second largest bank said both consumers and businesses continue to pay it off.

It's natural to have some credit reserves being released, said Sanford C. Bernstein & Co. analyst Brad Hintz. In an improving economy, that's part of the cycle. Hintz was surprised, however, by strong equities trading. While other firms said flow was weak, JPM said it was reasonable. Given the low volumes in the exhange lately, he called that an "aberration."

Hintz also thinks it's interesting that companies are "very negative" about fixed income. They've talked about leverage not being taken up and value at risk, or VaR, not rising. In other words, it tells him that they're not taking risk.

"In an environment where you saw yield curve flattening and credit spreads coming in, that should have been a good environment for trading, even if the trader was going to take risk up themselves," explained Hintz. "The Street seems to be holding in the reins in terms of their traders."

Financials to Report Next Week
TuesdayBank of America, Goldman Sachs
WednesdayMorgan Stanley, Wells Fargo
ThursdayCapital One

With a slew of other financials to report next week (see chart above), Hintz expects to hear that the outlook is getting better, including in areas of mergers and acquisitions and equity underwriting. But Hintz himself thinks the fourth-quarter will be weak.

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"This quarter is going to be a soft quarter," Hintz said. "Retail is slow and flow is slow, but the real outlook is looking into 2011 when trading activty should pick back up."

Now a New York City-based broker and asset managers analyst, Hintz served as chief financial officer at Lehman Brothers before leaving in the late 1990s. On Tuesday, "Institutional Investor" magazine recognized him as a top analyst in their 39th annual rankings for the "All-America Research Team."

Watch the video to see the full interview with Brad Hintz—it starts at 8:35.

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