Trader Talk

Barclays Financial Conference Likely to Make Headlines

Watch the Barclays Capital financial conference for more financial news. Brian Moynihan of Bank of America chose the Barclays financial conference in New York to discuss his cost-cutting initiatives. Many other bank executives will be speaking in the next few days: tomorrow (Tuesday), Comerica and Synovus speak, on Wednesday KeyCorp .

Many bank executives have been quiet for the past several months. But the quarter is ending in two weeks, so we are just before the quiet period. If bank execs are going to comment on business, or guide lower, this is the forum to do it.

Little surprise that I am hearing the conference is very well attended.

PNC , I am told by traders, said this morning that they were well-positioned for a softer economy, and that auto sales were strong; stock up a little more than 1 percent.

The big issue at the conference: what will earnings look like in a weak growth, low-rate environment? With many big names trading at 0.6 times tangible book value, the market is pricing in earnings that are far lower than analyst estimates. The problem: no one has a clue when or if "normalized" earnings will return.

How cheap is cheap? Just as an example, look at Comerica , trading at $ was $35 two months ago! Tangible book value is $30, so it's trading at 0.7 times book. Consensus earnings for 2012 are $2.46, so we are talking 9X forward earnings...most banks typically trade at a 10X-12X multiple, so we are looking at prices well below historic norms, even at the outside!

It gets crazier for European banks... I am told Societe Generale's tangible book value is about $45, current price is $15 and change...that's 0.35 percent of book value! Can you imagine trying to raise capital in that environment? It's too dilutive.

That's why a lot of people think many of the biggest French banks will be nationalized. But what happens to the sovereign ratings of France if they nationalize the banks? It will get hit.

See why this is so hard?

Meantime, analysts and strategists are finally cutting numbers on U.S. corporate earnings — and GDP — for 2012. The National Association of Business Economists (NABE) just lowered its 2012 GDP forecast to 2.3 percent from 3.2%. GDP growth will only be 1.7 percent in 2011. I noted earlier than Wells Fargo cut 2012 earnings estimates for the S&P 500, to $98.70 from $103.50.

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