275  7TH Ave  7th floor New York , NY 10001                                                                                                                dcullinanecpa@yahoo.com

​                                                                                                                                                                                                     Chelsea / Lower Manhattan​​

​Daniel Cullinane CPA                                   p 848-250-9587                                                                                                                                     

Many people have no need to go to bank branches at all. Almost every routine banking relationship can be done online. But a new survey shows that visits to branches may still be an essential part of what consumers want from their banking experience.

A survey of credit union members titled “2017 State of Credit Unions” showed that many members count on bank visits to manage their financial lives. Credit unions are not banks, but they provide mostly similar functions. They are owned and controlled by their members and provide financial services to those members. They are, in many ways, bank substitutes, since they provide all major retail bank services.

The study showed that:

It’s no longer necessary to visit a branch for many transactions, yet in-person banking at credit unions isn’t going away. Instead, it’s becoming more important and more specialized—and, as a result, the member service experience a branch provides is increasingly vital to a credit union’s success. In fact, during the next 10 years, banking will become much more human again—emphasizing personal relationships and local connectedness, for which credit unions are deservedly well known.

The data indicate that the trend of banks closing hundreds of branches may cripple the retail bank experience, and banks that keep human-based locations open could have an edge over competitors in the future.In some ways, relationships with banks have become more complex, more than at least some banks want them to be. The retail bank business has become something of a one-stop shop, providing checking and savings accounts, loans, mortgages, credit cards, investing services, credit scores and loyalty services that reward customers for their patronage.

As banks become a larger part of people lives, branches may be a key to holding clients.

​BANK STOCKS LOOK STRONG

​The share of home mortgage loan payments that are 30 days or more past due fell from 5.3% in July 2016 to 4.6% in July 2017. The foreclosure inventory rate fell from 0.9% to 0.7% in the same period.

The share of mortgages that transitioned from current to 30 days past due was 0.9% in July 2017, down 0.2 percentage points compared with July 2016. This year’s rate is below the transition rate of 1.2% just before the housing crisis struck, and well below the peak rate of 2% in November 2008.

The data were reported Tuesday by CoreLogic in its Loan Performance Insights report. Early-stage delinquencies, defined as 30 to 59 days past due, were trending lower in July 2017 at 2.0%, compared with the year-ago rate of 2.3%. The share of mortgages that were 60 to 89 days past due in July 2017 was 0.7%, unchanged compared with last year’s rate. According to CoreLogic, measuring early-stage delinquency rates is important for analyzing the health of the mortgage market.

CoreLogic’s chief economist, Dr. Frank Nothaft, said:

While the U.S. foreclosure rate remains at a 10-year low as of July, the rate across the 100 largest metro areas varies from 0.1 percent in Denver to 2.2 percent in New York. Likewise, the national serious delinquency rate remains at 1.9 percent, unchanged from June, and when analyzed across the 100 largest metros, rates vary from 0.6 percent in Denver to 4.1 percent in New York.

Frank Martell, president and CEO of CoreLogic, added:

Even though delinquency rates are lower in most markets compared with a year ago, there are some worrying trends. For example, markets affected by the decline in oil production or anemic job creation have seen an increase in defaults. We see this in markets such as Anchorage, Baton Rouge, and Lafayette, Louisiana where the serious delinquency rate rose over the last year.

The states with the lowest 30-plus delinquency rate in July 2017 were North Dakota (2.1%), Colorado (2.2%) and Montana and Oregon (2.6%). The 30-plus delinquency rate was highest in Mississippi (8.4%), Louisiana (7.8%) and New Jersey (7.1%).

The metro areas with the highest 30-plus delinquency rates in July were New York City (6.8%), Miami (6.3%) and Houston (5.5%). The metro areas with the lowest rates were San Francisco (1.8%), Denver (2.1%) and Los Angeles (2.9%).

​Ivanka Trump successfully pushed to get a family-focused tax credit included in the Republican tax overhaul proposal. She's got no time for a victory lap, though: Now comes the biggest political challenge of her time in Washington.

The White House adviser and first daughter is lobbying on Capitol Hill to make sure an expansion of the current $1,000 child tax credit stays in the tax plan and that it's big enough to matter. Then there's the added hurdle of getting the overall tax plan over the finish line — anything but a sure bet.

Trump has been wooing lawmakers and conservative advocacy groups behind closed doors and is expected to make her case in public as well, as part of a coordinated White House push for the tax overhaul. All this as she tries to steer clear of the West Wing histrionics involving her father that have threatened to engulf her at times. She's studiously sticking to her policy agenda, promoting issues such as STEM education and workforce development, while trying to tune out the noise.

"A significant expansion of the child tax credit will help parents have more money at a time in their lives when they need it the most and give them the flexibility to make the best choices regarding their families' care," Trump said in a statement to The Associated Press.

Trump stepped away from her executive roles at The Trump Organization and running her own fashion brand to join the administration, alongside husband Jared Kushner. She has won some praise for advocating for issues not often high on the Republican agenda, but has also faced criticism from liberals who expected her to do more to temper her father's conservative agenda.

A White House official who was not authorized to publicly discuss internal thinking said Ivanka Trump has welcomed the more disciplined West Wing structure put in place by chief of staff John Kelly, believing a more orderly decision-making process allows her to focus on her priorities. Still, some negative headlines have continued, including reports that Kushner used his personal email account on dozens of occasions to communicate with colleagues in the White House.

Protective of his children, President Donald Trump has expressed concern over criticism of his family, according to the White House official. In public, though, he's bragged about his daughter's accomplishments, calling her up on stage during a tax speech in North Dakota recently, asking her to address the crowd and calling her "baby" and "honey."

Ivanka Trump told US Weekly in a recent interview that she tries to ignore the critics.

"If I engaged too deeply, I wouldn't be able to prioritize the things I came here to do," she said.

As the tax negotiations get underway, Trump is stepping up her activity on Capitol Hill.

She met last week with Rep. Cathy McMorris Rogers, R-Wash., and spoke with Rep. Kristi Noem, R-S.D., and Sen. Marco Rubio, R-Fla., who has worked with her on the proposal, said the White House official. Her past meetings have included Sen. Lamar Alexander, R-Tenn., and Sen. Orrin Hatch, R-Utah, as well as Republicans and Democrats on the tax-writing House Ways and Means Committee.

She also spoke last month with conservative activists gathered at the headquarters of the group Americans for Tax Reform. The group's president, Grover Norquist, said she was "very well received. Spoke without notes. She understood what was going on."

Trump and Kushner have also been quietly hosting dinners for lawmakers at their home in Washington's Kalorama neighborhood in coordination with White House legislative officials. A person familiar with the events, but not authorized to speak publicly about them, confirmed the bipartisan dinners, which have focused on a variety of topics and were first reported by Axios.

Some key details remain unsettled. The tax blueprint does not specify what the child tax credit should increase to, nor has Trump offered a number. But she's made clear she wants the credit to be refundable, so people can still get money back even if they don't owe taxes. Rubio and Sen. Mike Lee, R-Utah, want to increase the tax credit to $2,000, but Rep. Kevin Brady, R-Texas, who heads the House Ways and Means Committee, wouldn't commit to doubling it.

Just as the administration has been publicly vague on some of the fine print around taxes, Trump herself has not publicly offered a bottom line, deferring to Congress to work out the details.

While Republicans in Congress see the tax overhaul as a must-do item, the proposal promises to be a heavy lift for the GOP, which has struggled to enact major legislation. Democrats and liberal family advocacy groups say the overall plan would provide limited benefits to low-income families while offering major cuts to the wealthy — and they say that any boost to the child tax credit must be viewed in that context.

"If you want to support families you would not support this tax plan," said Helen Blank of the National Women's Law Center. She noted it does not include direct help for child-care expenses.

The White House counters that the plan would help middle-class families with substantial tax cuts and says the tax-writing committees are considering adding more middle-income tax relief.

Earlier in the year, the White House considered a plan to enhance a tax credit geared specifically at child care expenses. But the White House argues that boosting the child tax credit provides flexibility, compared with other options. It goes to families led both by working parents and stay-at-home parents.

MORTGAGE DELINQUENCES DOWN

​OCTOBER NEWSLETTER 8

​INCOME TAX

​BANK BRANCHES

​The week of October 9 to 13 will mark the start of the earnings reporting season covering the third quarter of 2017. Most investors seem to have few worries that hurricanes and slower economic data are going to upset the corporate earnings picture. After all, the stock market keeps hitting higher and higher all-time highs each week. Back in the old days it was universally true that for the stock market to be doing well it meant that the banks and the financial sector had to be doing well. That makes sense on the surface — how great can the market be if those with the largest control of the markets aren’t doing well?

It turns out that many banks and financial firms have seen their price targets and expectations raised by analysts ahead of this earnings season. This is a classic play that older investors have seen many times, and what it means is that the banks and financials likely will have to post solid earnings. If not, their shares may have to give back some of those fresh gains.

What makes these target hikes even more demanding for the bank stocks is that many of the ratings are either reiterated Buy and Outperform ratings for the third or fourth time, and some of the ratings are also just at Neutral. There were even some analyst downgrades, despite price targets being hiked.

24/7 Wall St. has covered several of the key analyst calls made ahead of earnings. Some are robust target price hikes, and others seem more like maintenance calls ahead of time, so the analysts do not look like they are playing Monday morning quarterbacks.

Consensus analyst target data are from Thomson Reuters. Other color has been provided on each bank as well.

Bank of America Corp. (NYSE: BAC) was reiterated as Outperform and the price target was raised to $31 from $28 at Credit Suisse. That would generate 19% in total upside if the firm is correct on the price target and with the dividend included. Citigroup maintained its Neutral rating but raised its price target to $27 from $25. Bank of America’s consensus analyst target at Thomson Reuters is now $27.40, but that was $26.96 a month ago and $26.25 in July ahead of earnings. Its shares are up almost 19% so far in 2017.

Citigroup Inc. (NYSE: C) was maintained as Outperform at Credit Suisse, but the firm raised its target price to $83 from $73. That represents about 12% upside, if you include the dividend. Citigroup shares closed at $75.64 ahead of this call, in a 52-week trading range of $47.54 to $76.02 and with a consensus analyst target price of $74.27. The consensus analyst target price was $62.54 a month ago, and it was $66.24 back before the earnings release in July. Citigroup is up over 27% so far in 2017.

E*Trade Financial Corp. (NASDAQ: ETFC) was raised to Buy from Neutral and its price objective was raised to $49 from $44 (versus a $43.95 prior close) at Merrill Lynch. E*Trade shares were down over 2.3% on Friday but were last seen up 1.1% at $44.47 on Monday morning. The firm sees additional upside coming from more deposits onto the balance sheet, core growth, higher reinvestment rates, more margin upside, a decrease in E*Trade’s leverage ratio, the reinstatement of share repurchases and potentially lower tax rates. Just last week there were price target hikes from Deutsche Bank (to $49 from $47), Instinet (to $52 from $47) and Jefferies (to $46 from $43). The current consensus target price of $47.13 is up from $45.33 a month ago, and that target was all the way down at $41.23 in mid-July. The shares are up over 27% so far in 2017.

Goldman Sachs Group Inc. (NYSE: GS) was downgraded to Neutral from Outperform but the price target was raised to $255 from $240 at Credit Suisse, with the downgrade being based on valuation rather than fundamentals. Citigroup maintained its Neutral rating on Goldman Sachs, but it raised its target price to $250 from $225. Merrill Lynch has a Buy rating, but it raised its price objective to $275 from $260. Goldman Sachs has a 52-week range of $165.51 to $255.15 and a consensus target price of $239.76. Despite the target hikes and strength of the Dow and S&P 500, Goldman Sachs shares were last seen up less than 3% year to date, despite better performance of the last quarter and month.


JPMorgan Chase & Co. (NYSE: JPM) was reiterated as Outperform but the price target was raised to $110 from $103 at Credit Suisse. That is a call for 15% upside, with its dividend yield included. The consensus target price is $96.35, up from $95.12 a month ago and $94.40 in July, before the second-quarter earnings came out. JPMorgan’s stock is up over 12% so far in 2017.

Morgan Stanley (NYSE: MS) was raised to Outperform from Neutral and the price target was raised to $54 from $49 (versus a $49.76 close) at Credit Suisse. Citigroup also raised its target price to $50 from $46, but it maintained its Neutral rating. Morgan Stanley has a 52-week range of $30.96 to $50.14 and a consensus price target of $50.21. Its stock has a year-to-date return of almost 18%.

PNC Financial Services Group Inc. (NYSE: PNC) was more or less an at-the-money call from two banks. Citigroup has a Neutral rating but raised the price target to $135 from $126, and Credit Suisse raised its target to $135 from $126. Effectively that implies that PNC shareholders might only have the dividend to look for right now, rather than growth in the stock price. The consensus price target of $134.40 is up from $132.48 a month ago and $128.92 before its earnings report in July. The shares are up about 16% so far in 2017.

SunTrust Banks Inc. (NYSE: STI) was raised to Neutral from Underperform at Credit Suisse, but the firm raised its target price to $60 from $56. Citi raised its SunTrust target price to $63 from $60, despite having only a Neutral rating. The consensus analyst target of $62.86 is less than 1% higher than the $62.31 target a month ago and is about 2% higher than the $61.52 consensus analyst target price back in July. SunTrust shares are up almost 11% so far in 2017.

U.S. Bancorp (NYSE: USB) was maintained as Neutral at Citigroup, but its target was raised to $58 from $53 (versus a $54.18 close). Credit Suisse has a Neutral rating but raised its target to $53 from $50 on Monday. The 52-week range is $42.37 to $56.61, and the consensus target price was $54.66. The current consensus target of $54.78 is little changed from the $54.75 just 30-days ago and the $54.50 target back in mid-July. U.S. Bancorp’s shares have returned only about 5.5% so far in 2017.




















































Credit Suisse’s industrywide take on banks right now is that not much has changed from its own mid-quarter updates. That is that the bank’s fundamentals look just fine with slower loan growth, weak trading revenues and credit quality normalization baked into expectations. The firm’s take is that these expectations translate into a 5% year-over-year earnings per share growth, which Credit Suisse calls solid without much tailwind. Still, it sees 10% and more total return (stock upside and dividends combined) in its top-rated names.

JPMorgan has previewed the bank trends as being tepid. It sees very weak loan growth and a modest increase in net interest margin, and it expects weak trading revenues and weak investment banking revenues.

Keefe Bruyette & Woods has said that the rally in bank stocks should last a while longer. The firm noted that the global central banks talking more toward tighter monetary policy and supporting higher bond yields should be supportive for the banks when you add in moves toward lower bank regulation and with their valuations versus the S&P 500 being below the post-crisis average.

The reality is that most of the analyst calls, even when cautious on valuations, are looking for some additional upside in the banks. Many of these stocks have already seen stellar performance, which means they probably are going to have to keep delivering good news if they want to keep shareholders happy. Longer-term investors are quite used to seeing investors sell off bank stocks initially after good earnings reports. That being said, those sell-offs in recent years have proven to be good buying opportunities.