RBC's Gerard Cassidy joins 'Fast Money' to talk his outlook for bank stocks in 2024.
Tag: Bank of America Corp
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The U.S. avoided a recession in 2023. What’s the outlook for 2024? Here’s what experts are predicting
Grocery items are offered for sale at a supermarket on August 09, 2023 in Chicago, Illinois.
Scott Olson | Getty Images
Heading into 2023, the predictions were nearly unanimous: a recession was coming.
As the year comes to a close, the forecasted economic downturn did not arrive.
So what’s in store for 2024?
An economic decline may still be in the forecast, experts say.
The prediction is based on the same factors that prompted economists to call for a downturn in 2023. As inflation has run hot, the Federal Reserve has raised interest rates.
Typically, that dynamic has triggered a recession, defined as two consecutive quarters of negative gross domestic product growth.
Some forecasts are optimistic that can still be avoided in 2024. Bank of America is predicting a soft landing rather than a recession, despite downside risks.
More than three-fourths of economists — 76% — said they believe the chances of a recession in the next 12 months is 50% or less, according to a December survey from the National Association for Business Economics.
“Our base case is that we have a mild recession,” said Larry Adam, chief investment officer at Raymond James.
That downturn, which may be “the mildest in history,” may begin in the second quarter, the firm predicts.
Of the NABE economists who also see a downturn in the forecast, 40% say it will start in the first quarter, while 34% suggest the second quarter.
Americans who have struggled with high prices amid rising inflation may feel a downturn is already here.
To that point, 56% of people recently surveyed by MassMutual said the economy is already in a recession.
Layoffs, which made headlines at the end of 2023, may continue in the new year. While 29% of companies shed workers in 2023, 21% of companies expect they may have layoffs in 2024, according to Challenger, Gray & Christmas, an outplacement and business and executive coaching firm.
To prepare for the unexpected, experts say taking these three steps can help.
1. Reduce your debt balances
More than one third — 34% — of consumers went into debt this holiday season, down from 35% in 2022, according to LendingTree.
The average balance those shoppers are taking away is $1,028, well below last year’s $1,549 and the lowest since 2017.
But higher interest rates mean those debts are more expensive. One-third of holiday borrowers have interest rates of 20% or higher, LendingTree reports.
Meanwhile, credit card balances topped a record $1 trillion this year.
Certain moves can help control how much you pay on those debts.
First, LendingTree recommends automating your monthly payments to avoid penalties for late payments, including fees and rate increases.
If you have outstanding credit card balances that you’re carrying from month to month, try to lower the costs you’re paying on that debt, either through a 0% balance transfer offer or a personal loan. Alternatively, you may try simply asking your current credit card company for a lower interest rate.
Importantly, pick a debt pay down strategy and stick to it.
2. Stress-test your finances
Much of how a recession may affect you comes down to whether you still have a job, Barry Glassman, a certified financial planner and founder and president of Glassman Wealth Services, told CNBC.com earlier this year. Glassman is also a member of CNBC’s Financial Advisor Council.
An economic downturn may also create a situation where even those who are still employed earn less, he noted.
Consequently, it’s a good idea to evaluate how well you could handle an income drop. Consider how long, if you were to lose your job, you could keep up with bills, based on savings and other resources available to you, he explained.
“Stress-test your income against your ongoing obligations,” Glassman said. “Make sure you have some sort of safety net.”
3. Boost emergency savings
Even having just a little more cash set aside can help ensure an unforeseen event like a car repair or unexpected bill does not sink your budget.
Yet surveys show many Americans would be hard pressed to cover a $400 expense in cash.
Experts say the key is to automate your savings so you do not even see the money in your paycheck.
“Even if we do get through this period relatively unscathed, that’s all the more reason to be saving,” Mark Hamrick, senior economic analyst at Bankrate, recently told CNBC.com.
“I have yet to meet anybody who saved too much money,” he added.
Another advantage to saving now: Higher interest rates mean the potential returns on that money are the highest they have been in 15 years. Those returns may not last, with the Federal Reserve expected to start cutting rates in 2024.
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Jim Cramer dismisses recession fears and names sectors poised to soar after Fed meeting
CNBC’s Jim Cramer said the Federal Reserve’s decision to hold rates steady is a win for the bulls and is a sign the tightening cycle is coming to an end. With inflation easing and the potential for rate cuts next year, Cramer said the economy has managed a soft landing and more sectors are ready to soar.
“Sure, the easy money has been made in a couple of sectors — mostly tech — but now it’s time for a bunch of other sectors to shine, the economically sensitive ones that were supposed to be crushed by an inevitable recession,” Cramer said. “These stocks aren’t liked. May I suggest you cotton to them because the plane has landed, our seatbelts are unbuckled, we’re going down the gangway, calling an Uber and getting the heck out of the airport.”
The Fed held its key interest rate steady for the third straight time, and committee members indicated there could be at least three rate cuts in 2024.
Some on Wall Street worry this Fed action suggests there’s a recession on the horizon, but Cramer said it would be wise to ignore this outlook, adding that a strong labor report on Friday indicates the contrary. To Cramer, potential rate cuts would mean “smooth sailing” for stocks, with investors becoming less interested in bonds.
Although the market has been up for weeks, Cramer said there’s still money to be made in cyclical stocks and sectors that benefit from lower interest rates such as homebuilders, autos and financials. Cramer suggested buying financials that have hit lows recently, including Bank of America, JPMorgan Chase and even regional banks that suffered after the banking crisis in March. He also named Caterpillar, Stanley Black & Decker, Ford and General Motors.
“Not only is the Fed no longer our enemy, it’s much more likely to become our pal, assuming the economy stays on its current, slower course,” Cramer said. “This is the about-face that the bulls were waiting for.”
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Regulators caught Wells Fargo, other banks in probe over mortgage pricing discrimination
People pass by a Wells Fargo bank on May 17, 2023 in New York City.
Spencer Platt | Getty Images
Wells Fargo was snared in an industrywide probe into mortgage bankers’ use of loan discounts last year, CNBC has learned.
The discounts, known as pricing exceptions, are used by mortgage personnel to help secure deals in competitive markets. At Wells Fargo, for instance, bankers could request pricing exceptions that typically lowered a customer’s APR by between 25 to 75 basis points.
The practice, used for decades across the home loan industry, has triggered regulators’ interest in recent years over possible violations of U.S. fair lending laws. Black and female borrowers got fewer pricing exceptions than other customers, the Consumer Financial Protection Bureau has found.
“As long as pricing exceptions exist, pricing disparities exist,” said Ken Perry, founder of a Washington-based compliance firm for the mortgage industry. “They’re the easiest way to discriminate against a client.”
Wells Fargo received an official notice from the CFPB called an MRA, or Matter Requiring Attention, on problems with its discounts, said people with knowledge of the situation. It’s unclear if regulators accused the bank of discrimination or sloppy oversight. The bank’s internal investigation on the matter extended into late this year, said the people.
Wells Fargo, until recently the biggest player in U.S. mortgages, has repeatedly felt regulators’ wrath over missteps involving home loans. In 2012, it paid more than $184 million to settle federal claims that it charged minorities higher fees and unjustly put them into subprime loans. It was fined $250 million in 2021 for failing to address problems in its mortgage business, and more recently paid $3.7 billion for consumer abuses on products including home loans.
The behind-the-scenes actions by regulators at Wells Fargo, which hadn’t been reported before, happened in the months before the company announced it was reining in its mortgage business. One reason for that move was the heightened scrutiny on lenders since the 2008 financial crisis.
Wells Fargo later hired law firm Winston & Strawn to grill mortgage bankers whose sales included high levels of the discounts, said the people, who declined to be identified speaking about confidential matters.
‘Proud’ bank
In response to this article, a company spokeswoman had this statement:
“Like many in the industry, we take into consideration competitor pricing offers when working with our customers to get a mortgage,” she said. “As part of our renewed focus on supporting underserved communities through our Special Purpose Credit Program, we have spent more than $100 million over the last year to help more minority families achieve and sustain homeownership, including offering deep discounts on mortgage rates.”
Wells Fargo was “proud to be the largest bank lender to minority families,” she added.
The bank had this additional statement later Monday: “While we cannot comment on any regulatory matters, we don’t discriminate based on race, gender or age or any other protected basis.”
Wells Fargo stock vs the Financial Select Sector SPDR Fund
Regulators have ramped up their crackdown on fair lending violations recently, and other lenders besides Wells Fargo have been involved. The CFPB launched 32 fair lending probes last year, more than doubling the investigations it started since 2020.
Several banks received MRAs about lending practices last year, the agency said without naming any of the institutions. The CFPB declined to comment for this article.
‘Statistically significant’
The issue with pricing exceptions is that by failing to properly track and manage their use, lenders have run afoul of the Equal Credit Opportunity Act (ECOA) and a related anti-discrimination rule called Regulation B.
“Examiners observed that mortgage lenders violated ECOA and Regulation B by discriminating against African American and female borrowers in the granting of pricing exceptions,” the CFPB said in a 2021 report.
The agency found “statistically significant disparities” in the rates in which Black and female borrowers got pricing exceptions compared to other customers.
After its initial findings, the CFPB conducted more exams and said in a follow-up report this year that problems continued.
“Institutions did not effectively monitor interactions between loan officers and consumers to ensure that the policies were followed and that the loan officer was not coaching certain consumers and not others regarding the competitive match process,” the agency said.
Honor system
In other cases, mortgage personnel failed to explain who initiated the pricing exception or ask for documents proving competitive bids actually existed, the CFPB said.
That tracks with the accounts of multiple current and former Wells Fargo employees, who likened the process to an “honor system” because the bank seldom verified whether competitive quotes were real.
“You used to be able to get a half percentage off with no questions asked,” said a former loan officer who operated in the Midwest. “To get an additional quarter point off, you’d have to go to a market manager and plead your case.”
Pricing exceptions were most common in expensive housing regions of California and New York, according to an ex-Wells Fargo market manager who said he approved thousands of them over two decades at the company. In the years the bank reached for maximum market share, top producers chased loan growth with the help of pricing exceptions, this person said.
Change of policy
In an apparent response to the regulatory pressure, Wells Fargo adjusted its policies at the start of this year, requiring hard documentation of competitive bids, said the people. The move coincided with the bank’s decision to focus on offering home loans only to existing customers and borrowers in minority communities.
Many lenders have made pricing exceptions harder for loan officers to get and improved documentation of the process, though the discounts haven’t disappeared, according to Perry.
JPMorgan Chase, Bank of America and Citigroup declined to comment when asked whether they had received MRAs or changed their internal policies regarding rate discounts.
With reporting from CNBC’s Christina Wilkie
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Wall Street CEOs say proposed banking rules will hurt small businesses, low-income Americans
(L-R) Brian Moynihan, Chairman and CEO of Bank of America; Jamie Dimon, Chairman and CEO of JPMorgan Chase; and Jane Fraser, CEO of Citigroup; testify during a Senate Banking Committee hearing at the Hart Senate Office Building on December 06, 2023 in Washington, DC.
Win Mcnamee | Getty Images
Wall Street CEOs on Wednesday pushed back against proposed regulations aimed at raising the levels of capital they’ll need to hold against future risks.
In prepared remarks and responses to lawmakers’ questions during an annual Senate oversight hearing, the CEOs of eight banks sought to raise alarms over the impact of the changes. In July, U.S. regulators unveiled a sweeping set of higher standards governing banks known as the Basel 3 endgame.
“The rule would have predictable and harmful outcomes to the economy, markets, business of all sizes and American households,” JPMorgan Chase CEO Jamie Dimon told lawmakers.
If unchanged, the regulations would raise capital requirements on the largest banks by about 25%, Dimon claimed.
The heads of America’s largest banks, including JPMorgan, Bank of America and Goldman Sachs are seeking to dull the impact of the new rules, which would affect all U.S. banks with at least $100 billion in assets and take until 2028 to be fully phased in. Raising the cost of capital would likely hurt the industry’s profitability and growth prospects.
It would also likely help non-bank players including Apollo and Blackstone, which have gained market share in areas banks have receded from because of stricter regulations, including loans for mergers, buyouts and highly indebted corporations.
While all the major banks can comply with the rules as currently constructed, it wouldn’t be without losers and winners, the CEOs testified.
Those who could be unintentionally harmed by the regulations includes small business owners, mortgage customers, pensions and other investors, as well as rural and low-income customers, according to Dimon and the other executives.
“Mortgages and small business loans will be more expensive and harder to access, particularly for low- to moderate-income borrowers,” Dimon said. “Savings for retirement or college will yield lower returns as costs rise for asset managers, money-market funds and pension funds.”
With the rise in the cost of capital, government infrastructure projects will be more expensive to finance, making new hospitals, bridges and roads even costlier, Dimon added. Corporate clients will need to pay more to hedge the price of commodities, resulting in higher consumer costs, he said.
The changes would “increase the cost of borrowing for farmers in rural communities,” Citigroup CEO Jane Fraser said. “It could impact them in terms of their mortgages, it could impact their credit cards. It could also importantly impact their cost of any borrowing that they do.”
Finally, the CEOs warned that by heightening oversight on banks, regulators would push yet more financial activity to non-bank players — sometimes referred to as shadow banks — leaving regulators blind to those risks.
The tone of lawmakers’ questioning during the three-hour hearing mostly hewed to partisan lines, with Democrats more skeptical of the executives and Republicans inquiring about potential harms to everyday Americans.
Sen. Sherrod Brown, an Ohio Democrat, opened the event by lambasting banks’ lobbying efforts against the Basel 3 endgame.
“You’re going to say that cracking down on Wall Street is going to hurt working families, you’re really going to claim that?” Brown said. “The economic devastation of 2008 is what hurt working families, the uncertainty and the turmoil from the failure of Silicon Valley Bank hurt working families.”
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Bank of America CEO Brian Moynihan on higher interest rates, the yield curve and economic outlook
Brian Moynihan, Bank of America CEO, joins ‘Squawk on the Street’ to discuss how the changing rate environment is impacting the big banks, how much longer the balance sheet will be a point of conversation, and much more.
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RBC’s Gerard Cassidy names Bank of America and JPMorgan as his top picks in banking
Gerard Cassidy, RBC Head of U.S. Bank Equity Strategy, joins ‘Closing Bell’ to discuss bank stocks rallying as treasury yields fall.
03:25
an hour ago
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Citigroup considers deep job cuts for CEO Jane Fraser’s overhaul, called ‘Project Bora Bora’
When Citigroup CEO Jane Fraser announced in September that her sweeping corporate overhaul would result in an undisclosed number of layoffs, a jolt of fear ran through many of the bank’s 240,000 souls.
“We’ll be saying goodbye to some very talented and hard-working colleagues,” she warned in a memo.
Employees’ concerns are justified. Managers and consultants working on Fraser’s reorganization — known internally by its code name, “Project Bora Bora” — have discussed job cuts of at least 10% in several major businesses, according to people with knowledge of the process. The talks are early and numbers may shift in coming weeks.
Fraser is under mounting pressure to fix Citigroup, a global bank so difficult to manage that its challenges consumed three predecessors dating back to 2007. Already a laggard in every metric that matters to investors, the bank has fallen further behind rivals since Fraser took over in early 2021. It trades at a price-to-tangible book value ratio of 0.49, less than half the average of U.S. peers and one-third the valuation of top performers including JPMorgan Chase.
“The only thing she can do at this point is a really substantial headcount reduction,” James Shanahan, an Edward Jones analyst, said in an interview. “She needs to do something big, and I think there’s a good chance it’ll be bigger and more painful for Citi employees than they expect.”
Citigroup’s stock has been mired in a slump under CEO Jane Fraser.
If Fraser decides to part with 10% or more of her workforce, it would be one of Wall Street’s deepest rounds of dismissals in years.
Burdened by regulatory demands that hastened the retirement of her predecessor Mike Corbat, Citigroup’s expenses and headcount have ballooned under Fraser. While competitors have been cutting jobs this year, Citigroup’s staff levels remained at 240,000. That leaves Citigroup with the biggest workforce of any American bank except the larger and far more profitable JPMorgan.
An update on Fraser’s plan and its financial impact will come in January along with fourth-quarter earnings.
Nagging doubts
The stakes are high for America’s third-largest bank by assets. That’s because, after decades of stock underperformance, missed targets and shifting goal posts, Fraser is taking steps analysts have long called for. Failure could mean renewed calls to unlock value by taking even more drastic actions like dismantling the company.
Fraser has vowed to boost Citigroup’s returns to at least 11% in the next few years, a critical goal that would help the bank’s stock recover. To get close, Citigroup needs to increase revenue, use its balance sheet more efficiently and cut costs. But revenue growth may be hard to achieve as the U.S. economy slows, leaving expense cuts the biggest lever to pull, according to analysts.
“Not one investor I’ve spoken to thinks they’ll get to that return target in ’25 or ’26,” analyst Mike Mayo of Wells Fargo said in an interview. “If they can’t generate returns above their cost of capital, which is typically around 10%, they have no right to stay in business.”
Fraser put Titi Cole, Citigroup’s head of legacy franchises, in charge of the reorganization, according to sources. Cole joined Citigroup in 2020 and is a veteran of Wells Fargo and Bank of America, institutions that have wrestled with expenses and headcount in the past.
Boston Consulting Group has a key role as well. The consultants have been involved in mapping out the bank’s organization charts, tracking key performance metrics and making recommendations.
Low morale, high anxiety
Although the project’s code name evokes the turquoise waters of Tahiti, employees have been anything but calm since Fraser’s September announcement.
“Morale is super, super low,” said one banker who left Citigroup recently and has been contacted by former colleagues. “They’re saying, ‘I don’t know if I’m getting hit, or if my manager is getting hit.’ People are bracing for the worst.”
American residents eligible to travel to French Polynesia are charged less for on-island Covid tests if they are vaccinated ($50 versus $120).
Dana Neibert | The Image Bank | Getty Images
The ultimate number of layoffs will be determined in coming weeks as the massive project moves from management layers to rank-and-file workers. But some things are already clear, according to the people, who declined to be identified speaking about the confidential project.
Executives will see cuts beyond 10% because of Fraser’s push to eliminate regional managers, co-heads and others with overlapping responsibilities, they said.
For instance, chiefs of staff and chief administrative officers across Citigroup will be pruned this month, said one of the people with knowledge of the situation.
Operations staff who supported businesses that have been divested or reorganized are also at higher risk of layoffs, said the people.
Citi’s statement
Even if Fraser announces a large reduction in workers, investors will probably need to see expenses drift lower before being convinced, said Pierre Buhler, a banking consultant with SSA & Co. That’s because of the industry’s track record of announcing expense plans only to see costs creep up.
Still, it’s up to Fraser and her deputies to sign off on the overall plan, and they may opt to de-emphasize expense savings. The project is primarily about removing unnecessary layers to help Citigroup serve clients better, according to a current executive.
Publicly, the bank has only said that costs would start to ease in the second half of 2024.
Citigroup declined to comment beyond this statement:
“As we’ve said previously, we are committed to delivering the full potential of the bank and meeting our commitments to our stakeholders,” a spokeswoman said. “We’ve acknowledged the actions we’re taking to reorganize the firm involve some difficult, consequential decisions, but they’re the right steps to align our structure to our strategy and deliver the plan we shared at our 2022 Investor Day.”
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Goldman Sachs leads gainers among the 30 stocks in the Dow Jones Industrial Average; Bank of America up handily
Goldman Sachs Group Inc.’s stock
GS,
+4.42%
is the biggest gainer among the 30 stocks in the Dow Jones Industrial Average
DJIA,
+0.66%
at midday Friday with a rise of 4%. The stock has risen 12.6% so far this week. It’s also on pace for largest percent increase since November 10, 2022, when it rose 4.51%, according Dow Jones Market Data. Meanwhile, Bank of America Corp.’s stock
BAC,
+2.90%
was up about 3% and is on track for a 13% gain this week, which would be its best since it rose by 16.5% in the week ending June 5, 2020. -
As the market enters correction territory, don’t blame the American consumer
An Amazon.com Inc worker prepares an order in which the buyer asked for an item to be gift wrapped at a fulfillment center in Shakopee, Minnesota, U.S., November 12, 2020.
Amazon.com Inc | Reuters
The initial third-quarter report on gross domestic product showed consumer spending zooming higher by 4% percent a year, after inflation, the best in almost two years. September’s retail sales report showed spending climbing almost twice as fast as the average for the last year. And yet, bears like hedge-fund trader Bill Ackman argue that a recession is coming as soon as this quarter and the market has entered correction territory.
For an economy that rises or falls on the state of the consumer, third-quarter earnings data supports a view of spending that remains mostly good. S&P 500 consumer-discretionary companies that have reported through Oct. 25 saw an average profit gain of 15%, according to CFRA — the biggest revenue gain of the stock market’s 11 sectors.
“People are kind of scratching their heads and saying, ‘The consumer is holding up better than expected,’” said CFRA Research strategist Sam Stovall said. “Consumers are employed. They continue to buy goods as well as pursue experiences. And they don’t seem worried about debt levels.”
How is this possible with interest rates on everything from credit cards to cars and homes soaring?
It’s the anecdotes from bellwether companies across key industries that tell the real story: Delta Air Lines and United Airlines sharing how their most expensive seats are selling fastest. Homeowners using high-interest-rate-fighting mortgage buydowns. Amazon saying it’s hiring 250,000 seasonal workers. A Thursday report from Deckers Outdoor blew some minds — in what has been a tepid clothing sales environment — by disclosing that embedded in a 79% profit gain that sent shares up 19% was sales of Uggs, a mature line anchored by fuzzy boots, rising 28%.
The picture they paint largely matches the economic data — generally positive, but with some warts. Here is some of the key evidence from from the biggest company earnings reports across the market that help explain how companies and the American consumer are making the best of a tough rate environment.
How homebuilders are solving for mortgages rates
No industry is more central to the market’s notion that the consumer is falling from the sky than housing, because the number of existing home sales have dropped almost 40% from Covid-era peaks. But while Coldwell Banker owner Anywhere Real Estate saw profit fall by half, news from builders of new homes has been pretty good.
Most consumers have mortgages below 5%, but for new homebuyers, one reason that rates are not biting quite as sharply as they should is that builders have figured out ways around the 8% interest rates that are bedeviling existing home sellers. That helps explains why new home sales are up this year. Homebuilders are dipping into money that previously paid for other incentives to pay for offering mortgages at 5.75% rather than the 8% level other mortgages have hit. At PulteGroup, the nation’s third-biggest builder, that helped drive an 8% third-quarter profit jump and 43% climb in new home orders for delivery later, much better than the government-reported 4.5% gain in new home sales year-to-date.
“What we’ve done is simply redistribute incentives we’ve historically offered toward cabinets and countertops, and redirected those to interest rate incentives,” PulteGroup CEO Ryan Marshall said. “And that has been the most powerful thing.”
The mechanics are complex, but work out to this: Pulte sets aside about $35,000 for incentives to get each home to sell, or about 6% of its price, the company said on its earnings conference call. Part of that is paying for a mortgage buydown. About 80% to 85% of buyers are taking advantage of the buydown offer. But many are splitting the funds, mixing a smaller rate buydown and keeping some goodies for the house, the company said.
Wells Fargo economist Jackie Benson said in a report that builders may struggle to keep this strategy going if mortgage rates stay near 8%, but new-home prices have dropped 12% in the last year. In her view, incentives plus bigger price cuts than most existing homes’ owners will offer is giving builders an edge.
At auto companies, price cuts are in, and more are coming
Car sales picked up notably in September, rising 24% year-over-year, more than twice the year-to-date gain in unit sales. But they were below expectations at electric-vehicle leader Tesla, which blamed high interest rates, and at Ford.
“I just can’t emphasize this enough, that for the vast majority of people buying a car it’s about the monthly payment,” Tesla CEO Elon Musk said on its earnings call. “And as interest rates rise, the proportion of that monthly payment that is interest increases.”
Maybe, but that’s not what’s happening at General Motors, even if investor reaction to good numbers at GM was muted because of the strike by the United Auto Workers union.
GM beat earnings expectations by 40 cents a share, but shares fell 3% because of investor worries about the strike, which forced GM to withdraw its fourth-quarter earnings forecast on Oct. 24. Ford, which settled with the UAW on Oct. 25, said the next day it had a “mixed” quarter, as profit missed Wall Street targets due to the strike. Consumers came through, as unit sales rose 7.7% for the quarter, with truck and EV sales both up 15%. GM CEO Mary Barra said on GM’s analyst call that the company gained market share, posting a 21% gain in unit sales despite offering incentives below the industry average.
“While we hear reports out there in the macro that consumer sentiment might be weakening, etc., we haven’t seen that in demand for our vehicles,” GM CFO Paul Jacobson told analysts. But Ford CFO John Lawler said car prices need to decline by about $1,800 to be as affordable as they were before Covid. “We think it’s going to happen over 12 to 18 months,” he said.
Tesla’s turnaround plan turns on continuing to lower its cost of producing cars, which came down by about $2,000 per vehicle in last year, the company said. Along with federal tax credits for electric vehicles, a Model Y crossover can be had for about $36,490, or as little as $31,500 in states with local tax incentives for EVs. That’s way below the average for all cars, which Cox Automotive puts at more than $50,000. But Musk says some consumers still aren’t convincible. .
“When you look at the price reductions we’ve made in, say, the Model Y, and you compare that to how much people’s monthly payment has risen due to interest rates, the price of the Model Y is almost unchanged,” Musk said. “They can’t afford it.”
Most banks say the consumer still has cash, but not Discover
To know how consumers are doing, ask the banks, which disclose consumer balances quarterly. To know if they’re confident, ask the credit card companies (often the same companies) how much they are spending.
In most cases, financial services firms say consumers are doing well.
At Bank of America, consumer balances are still about one-third higher than before Covid, CEO Brian Moynihan said on the company’s conference call. At JPMorgan Chase, balances have eroded 3% in the last year, but consumer loan delinquencies declined during the quarter, the company said.
“Where am I seeing softness in [consumer] credit?” said chief financial officer Jeremy Barnum, repeating an analyst’s question on the earnings call. “I think the answer to that is actually nowhere.”
Among credit card companies, the “resilient” is still the main story. MasterCard, in fact, used that word or “resilience” eight times to describe U.S. consumers in its Oct. 26 call.
“I mean, the reality is, unemployment levels are [near] all-time record lows,” MasterCard chief financial officer Sachin Mehra said.
At American Express, which saw U.S. consumer spending rise 9%, the mild surprise was the company’s disclosure that young consumers are adding Amex cards faster than any other group. Millennials and Gen Zers saw their U.S. spending via Amex rise 18%, the company said.
“Guess they’re not bothered by the resumption of student loan payments,” Stovall said.
The major fly in the ointment came from Discover Financial Services, one of the few banks to make big additions to its loan loss reserves for consumer debt, driving a 33% drop in profit as Discover’s loan chargeoffs doubled.
Despite the fact that U.S. household debt burdens are almost exactly the same as in late 2019, and declined during the quarter, according to government data, Discover chief financial officer John Greene said on its call, “Our macro assumptions reflect a relatively strong labor market but also consumer headwinds from a declining savings rate and increasing debt burdens.”
At airlines, still no sign of a travel recession
It’s good to be Delta Air Lines right now, sitting on a 59% third-quarter profit gain driven by the most expensive products on their virtual shelves: First-class seats and international vacations. Also good to be United, where higher-margin international travel rose almost 25% and the company is planning to add seven first-class seats per departure by 2027. Not so good to be discounter Spirit, which saw shares fall after reporting a $157 million loss.
“With the market continuing to seemingly will a travel recession into existence despite evidence to the contrary from daily [government] data and our consumer surveys, Delta’s third-quarter beat and solid fourth-quarter guide and commentary should finally put the group at ease about a consumer “cliff,” allow them to unfasten their seatbelts and walk about the cabin,” Morgan Stanley analyst Ravi Shanker said in a note to clients.
One tangible impact: United is adding 20 planes this quarter, though it is pushing 12 more deliveries into 2024, while Spirit said it’s delaying plane deliveries, and focusing on its proposed merger with JetBlue and cost-cutting to regain competitiveness as soft demand for its product persists into the holiday season.
As has been the case throughout much of 2023, richer consumers — who contribute the greater share of spending — are doing better than moderate-income families, Sundaram said.
The goods recession is for real
Whirlpool, Ethan Allen and mattress maker Sleep Number all saw their stocks tumble after reporting bad earnings, all of them experiencing sales struggles consistent with the macro data.
This follows a trend now well-entrenched in the economy: people stocked up on hard goods, especially for the house, during the pandemic, when they were stuck at home more. All three companies saw shares surge during Covid, and growth has slacked off since as they found their markets at least partly saturated and consumers moved spending to travel and other services.
“All of the stimulus money went to the furniture industry,” Sundaram said, exaggerating for effect. “Now they’ve been falling apart for the last year.”
Ethan Allen sales dropped 24%, as the company said a flood in a Vermont factory and softer demand were among the causes. At Whirlpool, which said in second-quarter earnings that it was moving to make up slowing sales to consumers by selling more appliances to home builders, “discretionary purchases have been even softer than anticipated, as a result of increased mortgage rates and low consumer confidence,” CEO Marc Bitzer said during Thursday’s earnings call. Its shares fell more than 20%.
Amazon’s $1.3 billion holiday hiring spree
Amazon is making its biggest-ever commitment to holiday hiring, spending $1.3 billion to add the workers, mostly in fulfillment centers.
That’s possible because Amazon has reorganized its warehouse network to speed up deliveries and lower costs, sparking 11% sales gains the last two quarters as consumers turn to the online giant for more everyday repeat purchases. Amazon also tends to serve a more affluent consumer who is proving more resilient in the face of interest rate hikes and inflation than audiences for Target or dollar stores, according to CFRA retailing analyst Arun Sundaram said.
“Their retail sales are performing really well,” Sundaram said. “There’s still headwinds affecting discretionary sales, but everyday essentials are doing really well.
All of this sets the stage for a high-stakes holiday season.
PNC still thinks there will be a recession in early 2024, thanks partly to the Federal Reserve’ rate hikes, and thinks investors will focus on sales of goods looking for more signs of weakness. “There’s a lot of strength for the late innings” of an expansion, said PNC Asset Management chief investment officer Amanda Agati.
Sundaram, whose firm has predicted that interest rates will soon drop as inflation wanes, thinks retailers are in better shape, with stronger supply chains that will allow strategic discounting more than last year to pump sales. The Uggs sales outperformance was attributed to improved supply chains and shorter shipping times as the lingering effects of the pandemic recede.
“Though there are headwinds for the consumer, there’s a chance for a decent holiday season,” he said, albeit one hampered still by the inflation of the last two years. “The 2022 holiday season may have been the low point.”
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Big banks are quietly cutting thousands of employees, and more layoffs are coming
Pedestrians walk along Wall Street near the New York Stock Exchange in New York.
Michael Nagle | Bloomberg | Getty Images
The largest American banks have been quietly laying off workers all year — and some of the deepest cuts are yet to come.
Even as the economy has surprised forecasters with its resilience, lenders have cut headcount or announced plans to do so, with the key exception being JPMorgan Chase, the biggest and most profitable U.S. bank.
Pressured by the impact of higher interest rates on the mortgage business, Wall Street deal-making and funding costs, the next five largest U.S. banks cut a combined 20,000 positions so far this year, according to company filings.
The moves come after a two-year hiring boom during the pandemic, fueled by a surge in Wall Street activity. That subsided after the Federal Reserve began raising interest rates last year to cool an overheated economy, and banks found themselves suddenly overstaffed for an environment in which fewer consumers sought out mortgages and fewer corporations issued debt or bought competitors.
“Banks are cutting costs where they can because things are really uncertain next year,” Chris Marinac, research director at Janney Montgomery Scott, said in a phone interview.
Job losses in the financial industry could pressure the broader U.S. labor market in 2024. Faced with rising defaults on corporate and consumer loans, lenders are poised to make deeper cuts next year, said Marinac.
“They need to find levers to keep earnings from falling further and to free up money for provisions as more loans go bad,” he said. “By the time we roll into January, you’ll hear a lot of companies talking about this.”
Deepest cuts
Banks disclose total headcount numbers every quarter. While the aggregate figures mask the hiring and firing going on beneath the surface, they are informative.
The deepest cuts have been at Wells Fargo and Goldman Sachs, institutions that are wrestling with revenue declines in key businesses. They each have cut roughly 5% of their workforce so far this year.
At Wells Fargo, job cuts came after the bank announced a strategic shift away from the mortgage business in January. And even though the bank cut 50,000 employees in the past three years as part of CEO Charlie Scharf‘s cost-cutting plan, the firm isn’t done shrinking headcount, executives said Friday.
There are “very few parts of the company” that will be spared from cuts, said CFO Mike Santomassimo.
“We still have additional opportunities to reduce head count,” he told analysts. “Attrition has remained low, which will likely result in additional severance expense for actions in 2024.”
Goldman firings
Meanwhile, after several rounds of cuts in the past year, Goldman executives said that they had “right-sized” the bank and don’t expect another mass layoff like the one enacted in January.
But headcount is still headed down at the New York-based bank. Last year, Goldman brought back annual performance reviews where people deemed low performers are cut. In the coming weeks, the bank will terminate around 1% or 2% of its employees, according to a person with knowledge of the plans.
Headcount will also drift lower because of Goldman’s pivot away from consumer finance; the firm agreed to sell two businesses in deals that will close in coming months, a wealth management unit and fintech lender GreenSky.
A key factor driving the cuts is that job-hopping in finance slowed drastically from earlier years, leaving banks with more people than they expected.
“Attrition has been remarkably low, and that’s something that we’ve just got to work through,” Morgan Stanley CEO James Gorman said Wednesday. The bank has cut about 2% of its workforce this year amid a protracted slowdown in investment banking activity.
The aggregate figures obscure the hiring that banks are still doing. While headcount at Bank of America dipped 1.9% this year, the firm has hired 12,000 people so far, indicating that an even greater amount of people left their jobs.
Citigroup’s cuts
While Citigroup‘s staff figures have been stable at 240,000 this year, there are significant changes afoot, CFO Mark Mason told analysts last week. The bank has already identified 7,000 job cuts linked to $600 million in “repositioning charges” disclosed so far this year.
CEO Jane Fraser’s latest plan to overhaul the bank’s corporate structure, as well as sales of overseas retail operations, will further lower headcount in coming quarters, executives said.
“As we continue to progress in those divestitures … we’ll see those heads come down,” Mason said.
Meanwhile, JPMorgan has been the industry’s outlier. The bank grew headcount by 5.1% this year as it expanded its branch network, invested aggressively in technology and acquired the failed regional lender First Republic, which added about 5,000 positions.
Even after its hiring spree, JPMorgan has more than 10,000 open positions, the company said.
But the bank appears to be the exception to the rule. Led by CEO Jamie Dimon since 2006, JPMorgan has best navigated the surging interest rate environment of the past year, managing to attract deposits and grow revenue while smaller rivals struggled. It’s the only one of the Big Six lenders whose shares have meaningfully climbed this year.
“All these companies expanded year after year,” said Marinac. “You can easily see several more quarters where they go backwards, because there’s room to cut, and they have to find a way to survive.”
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CNBC Daily Open: Consumers in U.S. and China are powering their economies
[ad_2]Young customers buy second-hand luxury goods at a shopping mall in Shanghai, China, October 10, 2023.
CFOTO | Future Publishing | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
The bottom line
U.S. markets wavered Tuesday as investors digested September’s U.S. retail sales report and third-quarter earnings from banks.
Consumers spent much more last month than economist had expected, which “puts us on track for a strong GDP number later this month,” said David Russell of TradeStation, an online trading and brokerage firm. Following the retail report, Goldman Sachs boosted its forecast for third-quarter gross domestic product by 0.3 percentage points to 4%. That’d be the highest quarterly growth since the last quarter of 2021.
It’s not just U.S. consumers who are splurging. Retail sales in China also jumped more than expected in September, buoying the country’s third-quarter GDP growth. China’s economy might finally be stabilizing, giving it a foundation on which to meet — or even exceed — Beijing’s target of about 5% economic growth this year. A resurgent China will boost global economic growth, but might raise new fears about inflation on renewed demand from the country.
Indeed, the specter of high inflation and, correspondingly, higher-for-longer interest rates, haunted the retail report, at least for the U.S. The hot spending data “gives the Fed zero reason to loosen policy, which keeps the 10-year Treasury yield pushing toward 5%,” said Russell.
Treasury yields jumped yesterday to multiyear highs, pressurizing stocks despite a good start to earnings season. (Of the companies that have reported so far, 83% have surpassed earnings estimates.)
Major U.S. indexes made hesitant moves in both directions. The S&P 500 slipped a miniscule 0.01%, the Nasdaq Composite lost 0.25% while the Dow Jones Industrial Average eked out the merest gain of 0.04%.
If bond yields continue rising, it’s possible earnings reports might not have a big effect on the overall stock market. As Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance, put it, “It’s more the bond market driving the stock market at this point.”
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CNBC Daily Open: Bonds are driving stocks even amid big bank earnings
[ad_2]An employee exits Goldman Sachs headquarters in New York, Jan. 17, 2023.
Bing Guan | Bloomberg | Getty Images
This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Markets in holding pattern
U.S. stocks struggled to make any meaningful moves Tuesday as Treasury yields rose — the 2-year yield hit a 17-year high. Europe’s Stoxx 600 index shed 0.1% amid mixed economic news. In the U.K., average earnings excluding bonuses grew 7.8% year on year, the first time since January that the pace has slowed. In Germany, economic sentiment in October improved more than expected.Unstoppable U.S. consumer
U.S. retail sales in September increased 0.7% month on month, far more than the 0.3% Dow Jones estimate, according to an advance report from the Commerce Department. Sales excluding autos rose 0.6%, three times the expected 0.2%. “The U.S. consumer cannot stop spending,” said David Russell, global head of market strategy at TradeStation.Profit plunge at Goldman
Goldman Sachs posted better-than-expected profit and revenue for the third quarter. Still, year on year, profit sank 33% to $2.058 billion and revenue dipped 1% to $11.82 billion. A breakdown of the bank’s revenue performance: Bond trading revenue fell 6%, equities trading revenue rose 8% and investment banking revenue inched up 1%. Investors weren’t impressed, causing Goldman shares to drop 1.6%.Profit pop at Bank of America
Bank of America beat Wall Street’s estimates for earnings and revenue in the third quarter. Profit popped 10% from a year ago to $7.8 billion and revenue rose 2.9% to $25.32 billion. Rising interest rates and loan growth juiced BofA’s interest income 4% to $14.4 billion. Investors cheered the results, rewarding the bank with a 2.33% bump in its shares.[PRO] Buy gold, underweight stocks
All three major indexes are in the green for October. But JPMorgan’s top strategist isn’t convinced. This is his advice: Buy gold. And don’t buy so many stocks. High bond yields, interest rates and the Israel-Hamas war remain risks to financial markets, he said.The bottom line
Markets wavered Tuesday as investors digested September’s U.S. retail sales report and third-quarter earnings from banks.
Consumers spent much more last month than economist had expected, which “puts us on track for a strong GDP number later this month,” said David Russell of TradeStation, an online trading and brokerage firm. Following the retail report, Goldman Sachs boosted its forecast for third-quarter gross domestic product by 0.3 percentage points to 4%. That’d be the highest quarterly growth since the last quarter of 2021.
Narratives of a “soft landing” scenario, in which the U.S. economy subdues inflation without tipping into a recession, were reinforced by yesterday’s economic data. The “economy is on track for a soft-ish landing following healthy consumer activity, cooling inflation, and solid growth,” wrote UBS’ chief investment office.
A growing economy, in turn, is good news for corporate earnings and stocks. In the same note, UBS said “the profits recession is over,” meaning that earnings per share for S&P 500 companies should grow starting from the third quarter.
But the retail report isn’t all roses. The hot spending data will come “to the Fed’s dismay,” said Gina Bolvin, president of Bolvin Wealth Management, because the central bank “won’t like that higher rates are not deterring consumers from spending.”
Concurring, Russell said “it also gives the Fed zero reason to loosen policy, which keeps the 10-year Treasury yield pushing toward 5%.”
Indeed, Treasury yields jumped yesterday to multiyear highs, pressurizing stocks despite a good start to earnings season. (Of the companies that have reported so far, 83% have surpassed earnings estimates.)
Major indexes made hesitant moves in both directions. The S&P 500 slipped a miniscule 0.01%, the Nasdaq Composite lost 0.25% while the Dow Jones Industrial Average eked out the merest gain of 0.04%.
If bond yields continue rising, it’s possible earnings reports might not have a big effect on the overall stock market. As Chris Zaccarelli, chief investment officer of the Independent Advisor Alliance, put it, “It’s more the bond market driving the stock market at this point.”
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Banks seeing a divergence between stock performance and business performance: Gabelli’s Ian Lapey
Ian Lapey, Gabelli Portfolio Manager, joins ‘Closing Bell Overtime’ to talk U.S. Bancorp earnings results, the financial sector’s performance and more.
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Bank of America CEO Brian Moynihan says consumer activity has slowed down because of higher rates
Brian Moynihan, Bank of America chairman and CEO, joins ‘Squawk on the Street’ to discuss how sustainable the company’s net interest income growth is, the higher-than-expected cost of deposits, and what’s happening with the consumer.
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Bank of America tops profit estimates on better-than-expected interest income
CNBC's Leslie Picker joins 'Squawk Box' to break down the bank's quarterly earnings results.
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Bank of America tops profit estimates on better-than-expected interest income
Brian Moynihan, CEO of Bank of America
Heidi Gutman | CNBC
Bank of America topped estimates for third-quarter profit on Tuesday on stronger-than-expected interest income.
Here’s what the company reported:
- Earnings per share: 90 cents vs. expected 82 cent estimate from LSEG, formerly known as Refinitiv
- Revenue: $25.32 billion, vs. expected $25.14 billion
Profit rose 10% to $7.8 billion, or 90 cents per share, from $7.1 billion, or 81 cents a share, a year earlier, the Charlotte, North Carolina-based bank said in a release. Revenue climbed 2.9% to $25.32 billion, edging out the LSEG estimate.
Bank of America said interest income rose 4% to $14.4 billion, roughly $300 million more than analysts had anticipated, fueled by higher rates and loan growth.
CEO Brian Moynihan said the bank continued to add clients despite economic pressures. While consumer banking deposits were down 8% in the quarter, the segment posted a 6% increase in revenue to $10.5 billion, according to the company.
“We did this in a healthy but slowing economy that saw U.S. consumer spending still ahead of last year but continuing to slow,” he said in an earnings release.
Bank of America was supposed to be one of the biggest beneficiaries of higher interest rates this year. Instead, the company’s stock has been the worst performer among its big-bank peers in 2023. That’s because, under CEO Brian Moynihan, the lender piled into low-yielding, long-dated securities during the pandemic. Those securities lost value as interest rates climbed.
That’s made Bank of America more sensitive to the recent surge in the 10-year Treasury yield than its peers — and more similar to some regional banks that are also nursing underwater bonds. Bank of America had more than $100 billion in paper losses on bonds at midyear.
The situation has pressured the bank’s net interest income, or NII, which is a key metric that analysts will be watching this quarter. In July, the bank’s CFO, Alistair Borthwick, affirmed previous guidance that NII would be roughly $57 billion for 2023.
Bank of America shares were up about 1% in premarket trading Tuesday. The stock bad fallen 18% this year through Monday, trailing the 10% gain of rival JPMorgan Chase.
Last week, JPMorgan, Wells Fargo and Citigroup each topped expectations for third-quarter profit, helped by better-than-expected credit costs. Morgan Stanley posts results Wednesday.
This story is developing. Please check back for updates.
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JPMorgan Chase is set to report third-quarter earnings — here’s what the Street expects
Jamie Dimon, chairman and CEO of JPMorgan Chase, at the U.S. Capitol for a lunch meeting with the New Democrat Coalition in Washington, D.C., June 6, 2023.
Nathan Howard | Bloomberg | Getty Images
JPMorgan Chase is scheduled to report third-quarter earnings before the opening bell Friday.
Here’s what Wall Street expects, according to analyst estimates compiled by LSEG, formerly known as Refinitiv
- Earnings per share: $3.96
- Revenue: $39.65 billion
JPMorgan will be watched closely for clues on how the industry fared amid surging interest rates and rising loan losses.
While the biggest U.S. bank by assets has navigated volatile rates adeptly so far this year, the situation has caught several peers off guard, including a trio of midsized lenders that collapsed after deposit runs.
Bank stocks plunged last month after the Federal Reserve signaled it would keep interest rates higher for longer than expected to fight inflation amid unexpectedly robust economic growth. The 10-year Treasury yield, a key figure for long-term rates, jumped 74 basis points in the third quarter. One basis point equals one-hundredth of a percentage point.
Higher rates hit banks in several ways. The industry has been forced to pay up for deposits as customers shift holdings into higher-yielding instruments like money market funds. Rising yields mean the bonds owned by banks fall in value, creating unrealized losses that pressure capital levels. And higher borrowing costs tamp down demand for mortgages and corporate loans.
Banks including JPMorgan have also been setting aside more funds for anticipated loan losses.
Wall Street may provide little help this quarter, with investment banking fees likely to remain subdued and trading revenue expected to be flat or down slightly.
Finally, analysts will want to hear what CEO Jamie Dimon has to say about the economy and his expectations for the banking industry. Dimon has been vocal in his opposition against proposed increases in capital requirements.
Shares of JPMorgan have climbed 8.7% year to date, far outperforming the 19% decline of the KBW Bank Index.
Wells Fargo and Citigroup are scheduled to release results later Friday morning. Bank of America and Goldman Sachs report Tuesday, and Morgan Stanley discloses results on Wednesday.
This story is developing. Please check back for updates.
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Bank earnings kick off with JPMorgan, Wells Fargo amid concerns about rising rates, bad loans
Jamie Dimon, Chairman of the Board and Chief Executive Officer of JPMorgan Chase & Co., gestures as he speaks during an interview with Reuters in Miami, Florida, U.S., February 8, 2023.
Marco Bello | Reuters
American banks are closing out another quarter in which interest rates surged, reviving concerns about shrinking margins and rising loan losses — though some analysts see a silver lining to the industry’s woes.
Just as they did during the March regional banking crisis, higher rates are expected to lead to a jump in losses on banks’ bond portfolios and contribute to funding pressures as institutions are forced to pay higher rates for deposits.
KBW analysts Christopher McGratty and David Konrad estimate banks’ per-share earnings fell 18% in the third quarter as lending margins compressed and loan demand sank on higher borrowing costs.
“The fundamental outlook is hard near term; revenues are declining, margins are declining, growth is slowing,” McGratty said in a phone interview.
Earnings season kicks off Friday with reports from JPMorgan Chase, Citigroup and Wells Fargo.
Bank stocks have been intertwined closely with the path of borrowing costs this year. The S&P 500 Banks index sank 9.3% in September on concerns sparked by a surprising surge in longer-term interest rates, especially the 10-year yield, which jumped 74 basis points in the quarter.
Rising yields mean the bonds owned by banks fall in value, creating unrealized losses that pressure capital levels. The dynamic caught midsized institutions including Silicon Valley Bank and First Republic off guard earlier this year, which — combined with deposit runs — led to government seizure of those banks.
Big banks have largely dodged concerns tied to underwater bonds, with the notable exception of Bank of America. The bank piled into low-yielding securities during the pandemic and had more than $100 billion in paper losses on bonds at midyear. The issue constrains the bank’s interest revenue and has made the lender the worst stock performer this year among the top six U.S. institutions.
Expectations on the impact of higher rates on banks’ balance sheets varied. Morgan Stanley analysts led by Betsy Graseck said in an October 2 note that the “estimated impact from the bond rout in 3Q is more than double” losses in the second quarter.
Hardest-hit banks
Bond losses will have the deepest impact on regional lenders including Comerica, Fifth Third Bank and KeyBank, the Morgan Stanley analysts said.
Still, others including KBW and UBS analysts said that other factors could soften the capital hit from higher rates for most of the industry.
“A lot will depend on the duration of their books,” Konrad said in an interview, referring to whether banks owned shorter or longer-term bonds. “I think the bond marks will look similar to last quarter, which is still a capital headwind, but that there’ll be a smaller group of banks that are hit more because of what they own.”
There’s also concern that higher interest rates will result in ballooning losses in commercial real estate and industrial loans.
“We expect loan loss provisions to increase materially compared to the third quarter of 2022 as we expect banks to build up loan loss reserves,” RBC analyst Gerard Cassidy wrote in a Oct. 2 note.
Silver linings
Still, bank stocks are primed for a short squeeze during earnings season because hedge funds placed bets on a return of the chaos from March, when regional banks saw an exodus of deposits, UBS analyst Erika Najarian wrote in an Oct. 9 note.
“The combination of short interest above March 2023 levels and a short thesis from macro investors that higher rates will drive another liquidity crisis makes us think the sector is set up for a potentially volatile short squeeze,” Najarian wrote.
Banks will probably show stability in deposit levels in the quarter, according to Goldman Sachs analysts led by Richard Ramsden. That, and guidance on net interest income in the fourth quarter and beyond, could support some banks, said the analysts, who are bullish on JPMorgan and Wells Fargo.
Perhaps because bank stocks have been so beaten down and expectations are low, the industry is due for a relief rally, said McGratty.
“People are looking ahead to, where is the trough in revenue?” McGratty said. “If you think about the last nine months, the first quarter was really hard. The second quarter was challenging, but not as bad, and the third will be still tough, but again, not getting worse.”
