Opportunity in Weakness

“Across the U.S. banking industry, a chasm is opening between the strong and the weak.

“More than a month after scooping up Bear Stearns Cos., J.P. Morgan Chase & Co. posted a smaller-than-expected 53% decline in quarterly profit, helped by underlying revenue strength in the New York company's main businesses. The results helped spur a rally by beleaguered bank stocks, even though the future looks as treacherous as ever.

“Like Wells Fargo & Co., the San Francisco-based bank that lifted the stock market with surprisingly decent second-quarter results Wednesday, J.P. Morgan's net income of $2 billion, or 54 cents a share, showed that some battered U.S. banks remain resilient enough to capitalize on the havoc rippling through the industry as the economy struggles.

“‘There's a pretty big significant differentiation between the people who like their balance sheets and the people who don't -- and we're all going to be living with our balance sheets for a while,’ said James Rohr, chairman and chief executive of PNC Financial Services Group Inc. …

“The Pittsburgh bank's profit rose 19% to $505 million, or $1.45 a share, from $423 million, or $1.22 a share in last year's second quarter. PNC largely stuck to its roots as many regional-bank rivals chased go-go growth during the housing boom, a decision that will haunt them for years.

“J.P. Morgan, the biggest U.S. bank by stock-market value, is benefiting from its emphasis on cost-cutting and a strategy of squeezing additional revenue from existing operations. Executives at both banks made it clear Thursday that they will accelerate efforts to snatch market share from badly wounded rivals.

“‘This is a tremendous time of opportunity for our company given the weakness we're seeing broadly,’ said Michael Cavanagh, chief financial officer of J.P. Morgan.”

(“Banking's Winners, Sinners Part Ways; J.P. Morgan, PNC Results Show Resilience; Comerica Net Reflects Toll on Regional Firms.” Robin Sidel. Wall Street Journal: July 18, 2008. pg. C.1)

ALWAYS REMEMBER who you are and what you represent. Remember what you stand for, what you will not stand for, and what you will not fall for.

As the balance sheet reflects the priorities and principles of a firm's management, so too our personal sense of balance is centered and grounded in our values and integrity.

Good clear values, and solid integrity allow us to keep our balance and to prosper in times of weakness.

Remember your roots.