JPM's Tom Lee On The Bankruptcy Purge - Business Insider

JP Morgan chief U.S. equity strategist Tom Lee just published his latest thoughts on stocks.

One of the main takeaways is the momentum behind the S&P?s financial sector, one of the few sectors in which 3Q earnings estimates have been on the rise. Lee is bullish on Financials in 2013, and sheds light on an impetus for the sector's future performance.

From his note:

But a tailwind is building in 2013, in our view, which is the resetting of the credit scores for millions of Americans. The peak year of personal bankruptcies was 2005 and those records are removed from credit reports after 2012. Thus, beginning in 2013, we should see rapid improvements in the credit quality of millions of Americans.

You see, personal bankruptcy gets purged from credit records after seven years.

"US personal bankruptcy filings peaked in 2005 at 2.039mm (in retrospect, this was a bad sign)," writes Lee.

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Lee indicates that financial institutions and the housing sector stand to benefit from this purge of personal bankruptcies. As the credit scores for over two million Americans drastically improve, more will be able to receive loans from banks.

Lee also expects credit standards to ease in light of improving delinquency rates, especially in 3Q, and recommends that banks move employees from collections to originations to reflect these changing conditions. ?

SEE ALSO: GOLDMAN: The 27 Best Stocks With Huge Dividends And Giant Buyback Plans >

Source: http://www.businessinsider.com/jpms-tom-lee-bankruptcy-purge-2012-10

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