This morning big money center banks JPMorgan Chase (JPM) and Citigroup (C) delivered disappointing reports on fourth quarter revenue and earnings. Shares of JPMorgan Chase finished the day down 6.15%. Citigroup shares closed lower by 1.25%. But Wells Fargo (WFC) crushed earnings estimates for its fourth quarter. The stock gained 3.68% by the close.
Big banks will start to report December quarter earnings. this week. And investors looking for reassurance from big earnings gains aren’t going to be reassured by the initial reports. JPMorgan Chase (JPM) kicks off the earnings parade before the open on Friday, January 14
As we contemplate the extraordinarily strong earnings from Wall Street’s big banks last week, it’s important to remember that Wall Street isn’t Main Street.
This morning JPMorgan Chase (JPM) reported that earnings for the third quarter beat analyst estimates. Earnings came in at $3.74 a share–if you include one-time items such as a tax benefit and a big release from loan loss reserves. Without those items, earnings for the quarter were $3.03 a share. Wall Street had expected earnings of $3.00 a share. The quarter showed that big U.S. banks still aren’t seeing growth in loan demand. For the quarter consumer loans fell 2% and commercial loans dropped 5%.
Big bank earnings begin on Wednesday and Thursday. Unfortunately, won’t tell us anything useful about the margin pressures from rising global supply chain shipping costs or higher prices for raw materials. Those are the factors that could produce a quarter’s worth of warnings and unpleasant surprises once third quarter earnings season starts on October 13. But to learn about the effect of those margin pressures on earnings we’re going to have to wait for reports from the consumer and industrial companies that are on the front lines of these trends.
Before the market open today, July 13, JPMorgan Chase (JPM) reported earnings of $3.78 a share on revenue of $30.5 billion. But as expected trading revenue fell with fixed-income trading revenue down 44% year over year. Community banking revenue climbed just 3%; investment banking revenue rose just 1%; and commercial banking revenue grew just 3%. Average loans in the consumer banking unit fell 3%; across the company average loans were flat. A release of $3 billion from reserves against loan losses saved the quarter and produced a huge surprise above the $3.05 a share expected by Wall Street analysts.
Investors and traders will be looking to the first batch of earnings from big banks on Tuesday and Wednesday to answer two big questions: 1. Will earnings show the huge 65% year over year growth now expected by Wall Street analysts? 2. Will investors and traders sell on the news or push stocks higher on hoped for more economic (and earnings growth) to come? But I think w’ll have to wait until the week of July 27 to get answers to those queries.
Yesterday in my video “3 Picks for an Earnings Blowout” I argued the case that even the 61% second quarter year to year jump in earnings in the Wall Street analyst consensus was understated.. There’s a very high likelihood that we’ll see lots of positive earnings surprise in the second quarter earnings season the begins on July 13 when JPMorgan Chase reports earnings before the market opens. In that video I suggested three stocks JPMorgan Chase (JPM), Taiwan Semiconductor (TSM) and Advanced Micro Devices (AMD) as picks to play that second quarter earnings surprise. Today I’m adding one of these Advanced Micro Devices to my online portfolio with shares in my 12-18 month Jubak Picks Portfolio and Call Options in my Volatility Portfolio.
I’m starting up my videos on JubakAM.com again–this time using YouTube as a platform. The thirtieth YouTube video “3 Picks for the Earnings Blowout” went up today.
That didn’t take long. On Thursday the Federal Reserve reported that all 23 big banks tested in its annual stress test, passed. Which means that the last remaining restrictions on dividend increases and share buybacks are now history. Yesterday big banks started to announce dividend increases
Today, Monday June 14, JPMorgan Chase (JPM) CEO Jamie Dimon said that the bank is holding around $500 billion in cash in order to benefit from higher interest rates. Dimon told a Morgan Stanley virtual conference that he expects rising inflation will result in higher interest rates over the next 9 months.
Blow-out first quarter earnings results from the big banks didn’t produce huge gains this week–and that’s actually reassuring to me because it says a significant number of investors are still paying attention to fundamentals
