Wait for August FFIEC Call Reports Before Taking a Long Position in Banks

Nearly every major commercial bank has reported earnings over the last week.  The results have ranged from an $8.8 billion dollar loss at Wachovia (WB) to a $3.4 billion dollar profit at Bank of America (BAC).  The bank’s capital ratios have stayed adequate for the most part, even if it has meant changing the charge off procedure, as in the case of Wells Fargo (WFG). 

The perceived improvement, or for that matter the perception that the losses have peaked, has caused one of the greatest short-term rallies in the history of financial stocks.  Yet, I still worry that the hardships facing the commercial banks are nowhere near complete and as a result the current rally will prove to be merely a painful remainder of how much further the bank stocks have to fall to account for the near continuous addition of delinquent loans to their books.