Profits are profits, no matter how much the analysts grumble. Sure, Goldman Sachs switched to a January-December financial year and turned its December 2008 loss into something of a footnote, at least for now. Obviously, JPMorgan Chase had Wamu. Yes, Bank of America took a $2.2-billion gain on the unfortunate kaboom experienced by Merrill Lynch’s credit spreads—along with a one-time, $1.9-billion pre-tax gain on the sale of its China Construction Bank shares. Wells Fargo seems likely to give Wachovia a nod for a chunk of its expected record profits. Citigroup reported a whopping $2.7-billion mark-to-market gain on widening credit-default-swap spreads. But after all, shouldn’t institutions be allowed to benefit from the same accounting rules that may have exaggerated the holes they fell in with the unraveling of CDOs, MBMS, RMBS, and the like? Yes, fair is fair.

Certainly these banks aren’t pretending that the first quarter represented an economic turnaround, or even a banking sector turnabout. 

Indeed, the chief executive officers and chief financial officers made it clear that their deteriorating loan portfolios are still listing. Of course defaults will peak some time, JPMorgan Chase’s CEO Jamie Dimon told analysts last week, “but they’ve been going on consistently. We’ve shown you here they’re going to go up even more.” That would be in mortgages and HELOCs and credit cards.

Ned Kelly, CFO at Citi, was blunt with analysts about net credit loss ratios, alluding to a slide charting the NCL ratio “in our North American cards and first mortgage portfolios as well as the unemployment rate during the current recession. You can see from the 10.18 percent cards NCL rate that losses seen to be breaking historic correlation with unemployment,” he continued. “The combination of high unemployment and unprecedented declines in home values seems to be driving cards with net credit losses to new highs.”

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