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We’re raising our Morgan Stanley price target after a post-earnings stock surge to record highs

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Morgan Stanley shares soared to all-time highs Wednesday after third-quarter beats on the bank’s top and bottom lines, with strength seen across the board. Revenue for the three months ended Sept. 30 increased nearly 16% year over year to $15.38 billion, outpacing expectations of $14.4 billion, according to estimates compiled by LSEG. Earnings per share (EPS) jumped over 36% versus the year-ago period to $1.88, exceeding the $1.58 expected, according to LSEG. MS YTD mountain Morgan Stanley YTD Club stock Morgan Stanley was up 7.5%. At one stage it was even higher, punching through our $120 price target. We are setting a new PT of $130 and keeping our wait-for-a-pullback 2 rating in deference to the stock’s hot streak — up over 13% from its July high before the August market swoon and up 33% from its Aug. 5 low. Bottom line This was as clean a quarter as anyone could have asked for. Morgan Stanley outpaced expectations in just about every aspect of each operating division and put up very strong quarterly results in terms of firmwide key performance indicators. Last quarter, when the results weren’t quite what we were looking for, we told members that patience was warranted, and we would likely see dynamics improve in wealth management — a key focus area for investors who want to see the bank’s durable fee-based revenue streams continue to grow. That’s exactly what we saw with Wednesday morning’s release. Investment banking also shined as it did for its rivals, including fellow Club name Wells Fargo , which saw its overall earnings report and commentary on Friday blow the doors off. Wells Fargo stock on Wednesday was trying to extend its winning streak to nine straight sessions. We continue to believe that the improvements we’re seeing at Morgan Stanley in terms of efficiency and disciplined execution will magnify the tailwinds of a resilient U.S. economy and stimulus activity internationally. Commentary Return on tangible common equity (ROTCE) is an important metric in valuing financial institutions, such as determining what multiple to put on tangible book value, which came in at $43.76 per share. Morgan Stanley’s third-quarter ROTCE of 17.5% blew away expectations of 14.8%, according to estimates compiled by Bloomberg. On a year-to-date basis, the bank has realized an 18.2% ROTCE. The common equity tier 1 (CET1) ratio, meanwhile, indicates a financial institution’s ability to return cash to shareholders via buybacks and dividend payments. For that reason, we’re very happy to see that stand at 15.1%. That’s a hair lower than the 15.3% the Street was expecting but not too concerning. Total client assets across wealth management and investment management have now exceeded $7.5 trillion, a nearly $1.4 trillion increase over what we saw a year ago as management continues to execute on its mission of reaching $10 trillion over the long term. The overall efficiency ratio , which is calculated by dividing total non-interest expenses by net revenue — so lower is better — came in well below expectations and declined 300 basis points versus the year-ago period – though importantly did not come at the cost of continued investments in the business. On the call, CFO Sharon Yeshaya noted that in addition to revenue growth, the efficiency ratio improvement was the result of “disciplined prioritization of our controllable spend.” Morgan Stanley repurchased $750 million worth of shares in the third quarter — 8 million shares total — at an average purchase price of $99.94 each, which in light of Wednesday stock price looks like a pretty good move for shareholders. Given its 15.1% CET1 ratio, Morgan Stanley has plenty of excess capital at its disposal to both continue investing in growth and return excess capital to shareholders. Morgan Stanley Why we own it : We own Morgan Stanley for the rebound taking place in IPO and M & A activity along with growth in wealth management, which provides more durable fee-based revenues. We also view the bank’s excess capital as supportive of further shareholder returns via buybacks and dividends while also providing for additional investments in growth. Competitors : Goldman Sachs Weight in Club portfolio : 3.5% Most recent buy : Oct. 18, 2023 Initiated : July 12, 2021 Segments Institutional Securities in the third quarter benefited from strong international performance, with management calling out an acceleration in activity exiting the quarter, indicating the fourth quarter was also off to a strong start. In line with our thesis, CEO Ted Pick noted on the call that “a broadening equity market and evolving interest rate policy are favorable backdrops for our markets businesses.” Morgan Stanley’s large footprint allowed the firm to benefit from “shifting expectations around the size and timing of the Fed’s first rate cut” during the quarter, the change in monetary policy at the Bank of Japan and Chinese stimulus. Investment banking saw a pick-up in equity underwriting due to higher IPO activity and fixed income underwriting increased significantly from a year ago. Wealth management reported record revenue and a record pre-tax profit. Net new assets in the quarter were about $64 billion, well above the $53.5 billion expected and brings year-to-date net new assets to $195 billion, a 5% annualized increase versus where we started the year. Yeshaya said that “year-to-date flows are on pace to exceed last year, supported by an ongoing contribution of assets from advisor-led brokerage accounts to fee-based accounts.” The CFO expects net interest income “to be modestly down from the third quarter results largely on the back of lower rate expectations consistent with the forward curve.” That’s not too much of a concern given the Street has been looking for about $1.73 billion of net interest income in the current quarter. The pre-tax profit margin of 28.3%, a key watch item for investors given the increased focus on fee-based performance, outpaced the 26.8% consensus estimate and represents a very strong sequential increase versus the 26.8% we saw in the prior quarter. Investment management got a boost from higher asset management and related fees, which came on the back of an increase in assets under management. On the call, Yeshaya highlighted the benefits of the prior acquisition of Eaton Vance. (Jim Cramer’s Charitable Trust is long MS, WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

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Morgan Stanley shares soared to all-time highs Wednesday after third-quarter beats on the bank’s top and bottom lines, with strength seen across the board.

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October 16, 2024

We’re hiking our Wells Fargo price target after the stock surged on earnings

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October 11, 2024

Nvidia crushes sky-high expectations and charts continued AI-driven dominance for years to come

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In what was the most anticipated quarter this earnings season, Nvidia far outpaced lofty expectations on the top and bottom lines. Even better was a big revenue guide and a broader vision from CEO Jensen Huang that reinforced the notion that companies and countries are partnering with the AI chip powerhouse to shift $1 trillion worth of traditional data centers to accelerated computing. Revenue for its fiscal 2025 first quarter surged 262% year-over-year to $26.04 billion, well ahead of analysts’ forecasts of $24.65 billion, according to data provider LSEG, formerly known as Refinitiv. The company had previously guided revenue to $24 billion, plus or minus 2% — so that was a huge beat. Adjusted earnings-per-share increased 461% to $6.12, exceeding the LSEG compiled consensus estimate of $5.59. Adjusted gross margin of 78.9% also beat the Street’s 77.2% estimate, according to market data platform FactSet. The company had guided gross margins to 77%. plus or minus 50 basis points. On top of the strong results, Nvidia announced a 10-for-1 stock split. Although stock splits don’t technically create value, they do tend to have a positive impact on the stock. The company said the split is to “make stock ownership more accessible to employees and investors.” We commend Nvidia for doing this and will continue to press other companies to do the same. Nvidia most recently split its stock in July 2021 on a 4-for-1 basis. In after-hours trading, it was little surprise to see Nvidia shares surging. Nvidia Why we own it : Nvidia’s high-performance graphic processing units (GPUs) are the key driver behind the AI revolution, powering the accelerated data centers being rapidly built around the world. But this is more than just a hardware story. Through its Nvidia AI Enterprise service, Nvidia is in the process of building out a potentially massive software business. Competitors : Advanced Micro Devices and Intel Most recent buy : Aug 31, 2022 Initiation : March 2019 Bottom line What air pocket? Coming into the quarter, it sounded like the only thing that could hold Nvidia back was a product transition-related slowdown from customers delaying orders of the H100 and H200 GPUs (graphics process units) in anticipation of the superior Blackwell chip platform. As you can see from Nvidia’s big beat and upside guide, that was far from the case and demand is expected to exceed supply for quite some time. Should this narrative form again, here’s a good thing to remember for next time so that these concerns don’t shake you out of a strong long-term thesis: Jensen explained on the post-earnings conference call that customers are still so early in their build-outs that they have to keep buying chips to keep up in the current technology arms race. And technology leadership is everything. “There’s going to be a whole bunch of chips coming at them and they just got to keep on building and just, if you will, performance average your way into it. So that’s the smart thing to do,” the CEO said. More broadly, we didn’t hear anything Wednesday evening to change our long-term view about how Nvidia is the driving force behind the current AI industrial revolution. Here’s how Jensen explained the shift that’s happening: “Longer term, we’re completely redesigning how computers work. And this is a platform shift. Of course, it’s been compared to other platform shifts in the past, but time will clearly tell that this is much, much more profound than previous platform shifts. And the reason for that is because the computer is no longer an instruction-driven only computer. It’s an intention understanding computer.” Jensen went on to mention how computers not only interact with us, “but it also understands our meaning, what we intend that we asked it to do, and it has the ability to reason, inference iteratively to process and plan and come back with a solution.” The billions and billions of dollars being spent on accelerated computing is why we own Nvidia for the long-haul and are not trying to trade it back and forth on every headline. By the way, another bearish narrative we often hear is that the custom chips all the big cloud companies are making are a threat to Nvidia’s leadership. Jensen doesn’t see it that way because his platform system has the highest performance at the lowest total cost of ownership. It’s an unbeatable value proposition. NVDA YTD mountain Nvidia YTD The strong results and outlook, upbeat commentary, and stock split were sending Nvidia shares roughly 6% higher to above $1,000 per share for the first time ever. However, we don’t think the gains end here. We’re increasing our price target to $1,200 from $1050 and maintaining our 2 rating , meaning we view it as a buy on pullbacks. Quarterly Results Growth was driven by all customer types, but enterprise and consumer internet companies led the way. Large cloud companies represented a mid-40% of data center revenue in the quarter, so when you see companies like Oracle and Club names Amazon , Microsoft and Alphabet raise their capital expenditure outlooks, understand that a lot of those dollars will flow Nvidia’s way. And, there’s a good reason for it. On the call, Nvidia CFO Colette Kress estimates that for every $1 spent on Nvidia AI Infrastructure, a cloud provider has an opportunity to earn $5 in GPU instant hosting revenue over four years. One customer call out in the quarter was Tesla , expanding its training AI cluster to 35,000 H100 GPUs (graphic processing units). Nvidia said Tesla’s use of Nvidia AI infrastructure “paved the way” for the “breakthrough performance” of full self-driving version 12. (Full self-driving, or FSD, is the way Tesla markets its high level of driver-assisted software.) Interestingly, Nvidia sees automotive as a huge vertical this year, a multi-billion revenue opportunity across on-premise and cloud consumption. Another highlight was Meta’s announcement of Llama 3, its large language model. It was trained on a cluster of 24,000 H100 GPUs. Kress believes that as more consumer internet customers use generative AI applications, Nvidia will see more growth opportunities. The Tesla and Meta clusters are examples of what Nvidia calls “AI Factories.” The company believes “these next-generation data centers host advanced full-stack accelerated computing platforms where the data comes in and intelligence comes out. Nvidia also pointed out that sovereign AI has been a big source of growth. The company defines sovereign AI as a “nation’s capabilities to produce artificial intelligence using its own infrastructure, data, workforce, and business networks.” Kress expects sovereign AI revenue to approach the high single-digit billions of dollars this year from nothing last year. Looking ahead, Nvidia sees supply for the H100 improving but is still constrained on the H200. Even with the transition to Blackwell, Nvidia expects demand for Hopper for quite some time. “Everybody is anxious to get their infrastructure online, and the reason for that is because they’re saving money and making money, and they would like to do that as soon as possible,” the company said. In other words, customers will take whatever they can get. But look for Blackwell revenue later this year, perhaps in a very meaningful amount. The company explained manufacturing of Blackwell has been in production and shipments are expected to start the fiscal 2025 second quarter, ramp in the third, and customers will have full data centers stood up in the fourth quarter. Software was mentioned more than two dozen times on the conference call. And taken together, Nvidia said on the prior quarter’s call that its software and services reached an annualized revenue rate of $1 billion. They are high-margin, recurring revenue businesses, which continue to be key watch areas in future quarters. As for China, the company said it started to ramp up new products specifically made for the region that don’t require an export control license. The U.S. government has put restrictions on sales of the fastest chips for fear they will be used by the Chinese military. However, it doesn’t like China is expected to be a driver of revenue like it was in the past because the limitations to Nvidia’s technology have made the environment more competitive. Guidance The company’s fiscal second quarter guide should dismiss the market’s concerns that some sort of AI spending “air pocket” was forming. For the current Q2, Nvidia projected revenue of $28 billion, plus or minus 2%, above consensus estimates of $26.6 billion Adjusted gross margins are expected to be 75.5%, plus or minus 50 basis points, above estimates of 75.2%. Capital returns Nvidia increased its quarterly dividend by 150%, which is nice but the annual yield is insignificant to the investment case. More impactful is the $7.7 billion of stock the company repurchased in fiscal Q1. (Jim Cramer’s Charitable Trust is long NVDA. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Jensen Huang, co-founder and chief executive officer of Nvidia Corp., during the Nvidia GPU Technology Conference (GTC) in San Jose, California, US, on Tuesday, March 19, 2024.

David Paul Morris | Bloomberg | Getty Images

In what was the most anticipated quarter this earnings season, Nvidia far outpaced lofty expectations on the top and bottom lines. Even better was a big revenue guide and a broader vision from CEO Jensen Huang that reinforced the notion that companies and countries are partnering with the AI chip powerhouse to shift $1 trillion worth of traditional data centers to accelerated computing.

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May 22, 2024

Wells Fargo is flat after an earnings beat — here’s why and our outlook on shares

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Wells Fargo reported better-than-expected earnings results on Friday, but some weakness under the hood is putting a lid on the bank’s stock. Stay the course: Shares should move higher as management continues to shake off regulatory punishments for past misdeeds. Total revenue for the three months ended Mar. 31 ticked up less than 1% over last year, to $20.86 billion, exceeding analysts’ expectations of $20.2 billion, according to LSEG. Adjusted earnings of $1.26 per share was nicely above Wall Street’s consensus estimate of $1.11 per share, LSEG data showed. Note: The $1.26 EPS excludes a 6-cent per share ($284 million hit to net income) negative impact from a Federal Deposit Insurance Corporation (FDIC) special assessment for the rescue of regional banks after last year’s failure of Silicon Valley Bank. This special assessment charge was a 40-cent per share headwind in the fourth quarter of 2023. Wells Fargo Why we own it : We bought Wells Fargo as a turnaround story under CEO Charlie Scharf. He’s been making progress cleaning up the bank’s act and fixing its previously bloated cost structure after a series of misdeeds before his tenure. Scharf has also been working to get the Fed’s $1.95 trillion asset cap lifted and to boost Wells Fargo’s fee-generating revenue streams. Competitors : Bank of America and Citigroup Weight in Club portfolio : 4.76% Most recent buy : Feb. 24, 2022 Initiated : Jan. 8, 2021 Bottom line The results skew positive, even with some key line-item misses. For one, the bank’s overall efficiency ratio was a tad higher than expected. (The ratio is non-interest expense divided by total revenue, the lower the ratio the better the efficiency). However, we expect to see that number come down over time as management continues to address regulatory concerns and makes progress toward the ultimate removal of the asset cap. In addition, the bank’s net interest margin came up short, and therefore net interest income. We aren’t too surprised given that interest rates are a double-edged sword for banks. Higher rates mean higher revenue generation on loans; they also mean higher funding costs (interest payments on deposits) as customers withdraw deposits in search of higher yields elsewhere. None of this is news: We’ve seen this dynamic play out for several quarters already. That said, in general, higher rates are a net positive for Wells Fargo’s bottom line. Many positives outweighed the negatives. For example, non-interest expenses increased this quarter to a level above Street estimates, but non-interest income advanced at a faster rate and ahead of expectations. Likewise, the bank’s tangible book value per share came in a bit soft but was more than offset by better-than-expected return on tangible common equity performance — a key metric that investors take into heavy consideration when determining the appropriate valuation multiple to place on a bank’s stock. Also a plus: The bank’s provisions for credit losses were much lower than expected. That’s especially good considering the concerns many had regarding Wells Fargo’s commercial real estate exposure and increased credit usage by consumers as their pandemic savings diminished. On the post-earnings call with investors, CEO Charles Scharf said: “We continue to see strength in the U.S. economy, spending patterns of consumers using our debit and credit cards remain generally consistent and continued to grow year over year. Consumer credit is performing as we expect, wholesale credit continues to perform well, and our views around commercial real estate have not significantly changed since last quarter.” On the capital return front, we got a big step up in returns to shareholders, with the bank repurchasing $6.1 billion worth of stock (112.5 million shares) in the first quarter. That’s a major increase from the $2.4 billion (51.7 million shares) repurchased in the fourth quarter. Moreover, despite the CET 1 ratio — which compares a bank’s capital against its risk-weighted assets — coming in a tick below expectations, it’s nothing to be concerned about. There’s plenty of excess capital left for management to return to shareholders. Wells Fargo is on the right path to increasing efficiencies, driving ROTCE (return on average tangible common shareholders’ equity) toward management’s goal of 15%, and having its regulator-imposed asset cap removed. As a result, we are increasing our price target on WFC shares to $62 from $60, but maintaining our 2 rating as we look for a better entry point. WFC YTD mountain Wells Fargo YTD Guidance Wells Fargo’s management team maintained its outlook for full-year 2024 net interest income: 7% to 9% lower than the $52.4 billion level achieved in 2023. This implies a range of $47.7 billion to $48.7 billion, a miss versus the $48.8 billion consensus estimate coming into the print. We don’t like a miss on guidance. However, bank interest income estimates depend on interest rates, a factor Wells can’t control. Management said on Tuesday that it’s still early in the year and ultimately “the amount of net interest income we earn will depend on a variety of factors, many of which are uncertain, including deposit balances mix and pricing, the absolute level of interest rates and the shape of the yield curve and loan demand.” Keep in mind that management has been very focused on decreasing the revenue contribution from interest-based revenues, focusing instead on growing the non-interest, fee-based revenues, a move we strongly support as it serves to reduce volatility and reliance on interest rate dynamics that management can’t control. “We’re beginning to see early signs of share and fee growth which will be important as we diversify our revenues and reduce net interest income as a percentage of revenue,” the company said. Full-year non-interest expense guidance was also left unchanged at roughly $52.6 billion. That’s a bit below the $52.95 billion expected, which is a positive. First-quarter results Consumer banking and lending revenue fell nearly 3% year over year to $9.09 billion. Consumer and small business banking (CSBB) revenue fell 4% as the tailwind of higher debit card fees was more than offset by lower deposit balances. Within consumer lending, home lending was flat versus last year and up 3% sequentially. Credit card revenue increased 6% annually and 3% on a sequential basis. Auto loan revenue was down 23% year over year and down 10% sequentially. Personal lending increased 7% from last year but declined 1% sequentially. Commercial banking revenue fell 5% to $3.15 billion. Middle-market banking revenue declined 4% year over year, while asset-based lending and leasing revenue was down 7% annually. Non-interest expenses fell 4% due to a reduction in personnel expenses and efficiency gains. Corporate and investment banking revenue increased nearly 2% to $4.98 billion. Total banking revenue increased 5% year over year, as a 3% decline in lending and a 13% decline in treasury management and payments revenues were more than offset by a 69% increase in investment banking revenues. Commercial real estate revenue fell 7% as the headwind of lower loan balances was only partially offset by increased commercial mortgage-backed securities volumes. Markets revenue was up 2% on the back of a 6% increase in fixed income, currencies, and commodities (FICC) revenue, and a 3% increase in equities revenues. Non-interest expenses increased 5% annually, due to higher operating costs, which were only partially offset by efficiency gains. Wealth and investment management revenue advanced about 2% to $3.74 billion. Net interest income fell 17% year over year as deposits declined due to customers reallocating cash into higher-yielding securities. Non-interest income increased 9% thanks to higher asset-based fees driven by an increase in market valuations. Non-interest expenses were up 6% annually as higher revenue-related compensation was only partially offset by efficiency initiatives. (Jim Cramer’s Charitable Trust is long WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Wells Fargo customers use the ATM at a bank branch on August 08, 2023 in San Bruno, California.

Justin Sullivan | Getty Images

Wells Fargo reported better-than-expected earnings results on Friday, but some weakness under the hood is putting a lid on the bank’s stock. Stay the course: Shares should move higher as management continues to shake off regulatory punishments for past misdeeds.

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April 12, 2024

We're raising our Morgan Stanley price target despite the stock's post-earnings decline

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Morgan Stanley on Tuesday morning reported an adjusted earnings-per-share beat. But as we saw with Wells Fargo on Friday, EPS had initially looked like a miss. That, coupled with Morgan Stanley’s new CEO expressing macro caution, set the tone for a tough session for the stock. Revenue for the three months ended Dec. 30 increased 1% year-over-year to $12.9 billion, outpacing expectations of $12.75 billion, according to the consensus estimate compiled by Bloomberg. Earnings-per-share fell 10% on an annual basis to $1.13, exceeding the $1.01 expected. EPS numbers from the major financial institutions have been messy this quarter as analysts account for a Federal Deposit Insurance Corporation (FDIC) special assessment imposed on big banks to pay for the rescue of regional banks after last year’s failure of Silicon Valley Bank. Morgan Stanley’s EPS of $1.13 excludes the one-time FDIC payment and other one-time legal charges taken in Q4. MS 1Y mountain Morgan Stanley 1 year Shares of Morgan Stanley were on a five-session losing streak with Tuesday’s post-earnings 5% decline. However, Morgan Stanley — and for that matter, Wells Fargo — saw their stocks surge into the end of 2023. We had been cautioning members that banks may have been coming into the quarterly prints too hot. Not helping matters, on his first post-earnings conference call as CEO, Ted Pick said he sees two possible headwinds ahead: “The first is geopolitical, that global conflicts intensify and the second is the state of the U.S. economy over the course of 2024.” Bottom line Morgan Stanley’s fourth quarter was largely better than expected, with topline strength resulting from revenue beats in all three primary operating segments. We’re especially pleased to see the bounce back in Wealth Management and Investment Banking — the former, in particular, as poor performance in the third quarter weighed heavily on shares. It’s important to consider quarterly EPS excluding these one-time charges because it provides a better basis for valuation on a go-forward basis. Looking at the adjusted earnings numbers is always standard operating procedure. But this quarter, EPS has been muddled by the FDIC special assessment — which is the result of the SVB collapse in March 2023 and the subsequent troubles at other regionals, and not due to any missteps by Morgan Staley. The reported efficiency ratio did reflect a miss versus consensus estimates, however, it appears to be largely in line with expectations when factoring out the legal and FDIC charges. Those one-time charges also appear to be the main reason non-compensation expenses came in above estimates and certainly weighed on the firm’s return on tangible common equity (ROTCE). Nonetheless, management reiterated their longer-term commitment to achieving a 20% ROTCE and a 70% efficiency ratio, along with a 30% pre-tax margin in Wealth Management and more than $10 trillion in total client assets. For the full-year 2023, the firm’s efficiency ratio came in at 77%, ROTCE was 12.8%, and the pre-tax Wealth Management margin was 24.9% in 2023. Total client assets ended last year at $6.6 trillion. However, it’s important to note that one-time charges of nearly $900 million taken throughout the full year — including one-time legal matters, the FDIC charge, and severance expenses — resulted in a 164 basis point headwind for the efficiency ratio and a 105 basis point headwind on ROTCE. So, excluding these factors, we get a full-year efficiency ratio closer to 75.5% and a ROTCE closer to 13.9%. Morgan Stanley’s full-year Wealth Management pre-tax margin was also closer to 25.5% when excluding the FDIC special assessment associated with that segment. Full-year earnings per share would have also been 44 cents higher. Also included in full-year expenses was $293 million relating to the now-complete integration of E-Trade. So, as we look ahead to 2024, Morgan Stanley should be valued with the understanding that 2023 saw over $1 billion in one-time items that don’t represent normal operations. Lastly, the firm’s common equity tier 1 (CET1) ratio, which measures capital versus risk-weighted assets, despite being a tick below expectations, remains well above the firm’s 13.3% minimum regulatory requirement. That level provides ample room to return more cash to shareholders and a strong cushion to absorb any increased regulator requirement in the future. With all that in mind, we’re reiterating our 1 rating and bumping our price target up to $98 per share from $95. We see the current $85 level as a good entry point. But for the Club’s large position, it’s not enough below our cost basis to buy here. For us, we’d like to see more of a pullback before we add shares. Companywide Q4 results Looking at the Segment Sales part of the earnings table above, Institutional Securities saw an across-the-board and overall beat in the quarter. Investment banking revenue advanced 5% from last year, driven entirely by a 25% increase in fixed-income underwriting revenues. Advisory revenues and equity underwriting revenues were both down marginally versus the year-ago period. Equity trading revenue rose 1% from last year — benefitting from the absence of markdowns that hit the segment last year, though this was offset by higher funding and liquidity costs. Fixed-income trading revenue was up 1.1% — benefitting from higher commodities-related revenue and increased client activity, though this was partially offset by lower credit product sales. Total expenses for the segment (not seen on the table) increased by 13% to $4.51 billion, with growth in both compensation and non-compensation expenses. The pre-tax margin reported was 8.3% down from 15.6% in the year-ago period. Excluding one-time items, the pre-tax margin was closer to 15.75%, reflecting an improvement year-over-year. Morgan Stanley’s Wealth Management segment sales were mixed for the quarter. But the entire segment was able to exceed expectations. Asset management revenue increased 6% from last year, reflecting higher asset levels and the impact of positive fee-based asset flows. The firm gathered net new assets in the quarter of $47 billion, bringing full-year 2023 additions to $282 billion. Transactional revenue increased nearly 17% but was largely unchanged when excluding the impact of mark-to-market gains on investments associated with employee deferred compensation plans. Net interest income revenue fell a little over 13% from last year but was right in line with Street expectations. Still, it disappointed investors looking for flat comps. The bank attributed the declines to a change in the deposit mix that was only partially offset by the tailwind of higher interest rates. Total expenses for the segment increased 10% annually to $5.24 billion. Pre-tax margin at the segment was 21.5%, which includes one-time items. The Investment Management segment delivered an overall beat. Asset management and related fees were up a little over 2% from last year on higher average assets under management, which benefited from increased asset values. Performance-based income and other was down more than 32% from a year ago. Total expenses for the segment declined by a little less than 4% annually to $1.2 billion, as a result of lower compensation associated with carried interest. Capital returns Morgan Stanley repurchased 17 million shares in the fourth quarter, at an average purchase price of $75.23 per share, a great level given where shares are now, even with Tuesday’s pullback. The result is a return of capital to shareholders of $1.3 billion. At current share-price levels, Morgan Stanley has an annual dividend yield of 4%. (Jim Cramer’s Charitable Trust is long MS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Ted Pick, co-president of Morgan Stanley, speaks during a Bloomberg Television interview in New York, US, on Thursday, Oct. 26, 2023.

Jeenah Moon | Bloomberg | Getty Images

Morgan Stanley on Tuesday morning reported an adjusted earnings-per-share beat. But as we saw with Wells Fargo on Friday, EPS had initially looked like a miss. That, coupled with Morgan Stanley’s new CEO expressing macro caution, set the tone for a tough session for the stock.

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January 16, 2024

We’re lowering our price target on Morgan Stanley as shares tumble on earnings results

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Morgan Stanley (MS) reported better-than-expected third-quarter results Wednesday, even as investor disappointment over its wealth management business and the prolonged slump in investment banking weighed heavily on shares — prompting us to lower our price target on the Club holding. While it’s fair to see the stock trade down on the earnings report, the punishment looks too aggressive ahead of what should be a much better 2024 for the investment-banking industry. And that’s why we bought shares into weakness Wednesday. Revenue for the three months ended Sept. 30 increased 2% year-over-year, to $13.27 billion, outpacing analysts’ expectations of $13.23 billion, according to estimates compiled by LSEG. Earnings-per-share (EPS) fell 6% on an annual basis, to $1.38, exceeding the $1.28-per-share estimate forecasted by analysts, LSEG data showed. Bottom line Morgan Stanley shares plummeted by 6.6% Wednesday, to hit a new 52-week low of roughly $75 apiece. The headline figures came in better than Wall Street expected, but the bank reported weak results at its investment-banking and wealth-management units. A softer performance in investment banking was not a surprise, given the current dearth of mergers and acquisitions and a still-frozen market for initial public offerings. But investors were clearly taken aback by shortcomings in wealth management, which had become the bank’s most reliable segment. Wealth management revenues increased about 5% on an annual basis, but fell short of analysts’ forecasts. Net interest income also came up short, as clients allocated more of their dollars to higher-yielding cash alternatives. More broadly, Wall Street was concerned over the bank’s poor showing for net new assets, which came in at just $36 billion in the third quarter. In the first half of 2023, Morgan Stanley grew its assets by roughly $200 billion, in line with its target of adding $1 trillion in net new assets every three years — a goal we think is still attainable. Morgan Stanley management has previously said it would be misguided to extrapolate one quarter’s results on net new assets to the next. And the total figure for this year, at $236 billion, still puts the bank on track to reach its $1 trillion goal. That’s why we added to our position, and expect to see an uptick in new assets in the coming quarters. At the same time, investment-banking activity should pick up after the Federal Reserve signals it’s finished raising interest rates. “The minute you see the Fed indicate they’ve stopped raising rates, the M & A and underwriting calendar will explode because there is enormous pent-up activity,” CEO James Gorman said Wednesday. While we continue to be compensated by a large, safe dividend yield of 4.6%, we are, nonetheless, lowering our price target on Morgan Stanley to $95 a share, down from $105, to account for the sluggishness in investment banking and multiple compression across bank stocks. Institutional securities Investment banking revenues fell 27% from last year, as lower advisory revenues and fixed-income underwriting revenues were partially offset by higher equity underwriting. Advisory levels declined due to fewer completed M & A transactions, while fixed-income underwriting revenues were lower primarily due to lower event-driven, non-investment grade activity. Equity-underwriting revenues grew despite lower revenues from IPOs, mainly due to higher block offerings. Equity trading revenues increased 2% from last year, while fixed-income revenues declined 11%. Both topped analysts’ estimates. Total expenses for the segment increased by 5%, to $4.38 billion, with growth in both compensation and non-compensation expenses. Wealth management Asset management revenue increased 7% from last year, reflecting higher average asset levels and the impact of positive fee-based asset flows. Transactional revenue also grew by 7% when excluding the impact of mark-to-market gains on investments associated with employee deferred compensation plans. Net interest income revenue fell by nearly 3% from last year, disappointing investors looking for largely flat results. The bank attributed the declines to clients moving money out of interest-rate-sensitive cash to higher-yielding cash alternatives. The decline is part of an industry-wide dynamic whereby clients are shifting funds to seek a better return in areas outside traditional cash accounts. Total expenses for the segment increased 4% annually, to $4.65 billion. Pre-tax margins at the segment were 26.7%, compared with 26.9% during the same period last year, or 28.4% excluding the impact of integration-related expenses. Investment management Asset management and related fees grew 3% from last year on higher average assets under management, which grew due to increased asset values. Total expenses for the segment increased by about 4% annually, to $1.1 billion, primarily due to higher compensation associated with carried interest. Capital returns Morgan Stanley repurchased 17 million shares in the third quarter, at an average purchase price of $87.59 per share, resulting in a return of capital to shareholders of $1.5 billion. That’s up from $1 billion worth of stock repurchased in the second quarter, reflecting confidence in the bank’s capital position. (Jim Cramer’s Charitable Trust is long MS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

The Morgan Stanley headquarters is seen in New York City on Jan. 17, 2023.

Michael M. Santiago | Getty Images

Morgan Stanley (MS) reported better-than-expected third-quarter results Wednesday, even as investor disappointment over its wealth management business and the prolonged slump in investment banking weighed heavily on shares — prompting us to lower our price target on the Club holding.

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October 18, 2023

Wells Fargo remains a stock to own, as the bank reports stellar quarterly results

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Wells Fargo ‘s (WFC) stronger-than-expected third-quarter results and raised guidance on Friday prompted us to reaffirm our buy rating on the stock, as shares soared on the news. Total revenue for the three months ended Sept. 30 advanced over 6.6% year-on-year, to $20.86 billion, exceeding analysts’ expectations for $20.12 billion, according to Refinitiv. Earnings-per-share (EPS) of $1.39 came in above Wall Street’s consensus estimate of $1.24 per share, Refinitiv data showed. The $1.39-per-share figure excludes a 9-cent earnings benefit resulting from tax matters from the prior reporting period. Shares of Wells Fargo jumped more than 3% in midday trading Friday, to roughly $41 apiece. Bottom line Wells Fargo’s quarterly revenue outpaced expectations on the back of better-than-expected results for both net interest income (NII) and non-interest income. Moreover, earnings surged thanks to a decline in non-interest expenses, even if they came in slightly higher than we would have liked. Expense control is a significant reason why we’ve preferred Wells Fargo over some of the other big banks. One of management’s main goals is to improve efficiency, whether it be through reducing head count or optimizing parts of the business. Although management was hesitant to provide specific guidance expenses for 2024, we were encouraged to hear the bank is on track with its $10 billion multiyear cost-savings program. Compounding the headline beat was strong performance on several key operating metrics including the efficiency ratio, net interest margin, and return on tangible common equity. The tangible book value was a bit lighter than expected, but was still up over 9% year-over-year. The bank also had to increase it’s allowance for credit losses as a result of commercial real estate office loans and higher credit card loan balances, though the increase was less than expected. The firm’s common equity tier-one ratio (CET1) also came in ahead of expectations. This is a key metric to be aware of – especially ahead of an expected increase in capital requirements from global regulators – as it highlights the bank’s ability to continue supporting cash returns to shareholders like us. To that end, management returned $1.5 billion to shareholders via the repurchase of 33.8 million shares, and paid out a common stock dividend of 35 cents per share during the quarter, up 17% from the second quarter’s payout. Regarding the upcoming capital requirement increase, known as the Basel III framework, CEO Charlie Scharf said: “Fortunately, we’ve come into this from a strong position as our current capital levels are above the estimated regulatory minimum plus buffers. However, we still need to decide how much of an additional buffer we went to maintain…At this point we still see a path to currently increase our level of CET1 as appropriate, increasing our dividend and repurchasing common stock.” Management also noted Friday that $32.2 billion of the loans on the bank’s balance sheet (about 3% of total loans outstanding) were office loans, down 3% sequentially as “vacancy rates continue to be high”. The office market remains the weakest part of commercial real estate, and the bank said it remains committed to monitoring and de-risking its portfolio. Taken together, Wells Fargo delivered a stellar quarter that’s hopefully a sign of things to come as we kick off third-quarter earnings season. As a result we reiterate our 1 rating on the stock — meaning we would be buyers here — and a $50-per-share price target. 2023 outlook Wells Fargo raised its full-year 2023 forecast for NII and now expects it to be up roughly 16% in 2023, at roughly $52.2 billion, compared with $45 billion in 2022. The NII guidance is up from the roughly 14% increase the bank had previously forecast and above the $51.68 billion figure Wall Street predicted. On the other hand, Wells Fargo raised its non-interest expenses guidance for 2023, to about $51.5 billion, up from a prior target of roughly $51 billion but below analysts’ expectations for $52.5 billion. Notably, the two-percentage-point increase to the NII guidance amounts to an additional $900 million, which more than exceeds the $500 million expenses increase, resulting in a net positive. “Looking ahead, the U.S. economy has continued to be resilient with key support from [the] labor market and strength in consumer spending,” Scharf said Friday. But he added that he expects the economy to continue to slow, citing “significant uncertainty ahead.” Companywide results Segment results Consumer banking and lending revenue rose 3.3%, to $9.58 billion. Consumer-and-small-business banking (CSBB) revenue increased 7% year-over-year and 1% sequentially. Higher interest rates were only partially offset by lower deposits and a reduction in deposit-related fees that reflect the bank’s efforts to “help customers avoid overdraft fees.” Home lending was down 14% from last year but down only 1% sequentially. Credit card revenue increased 2% annually and 4% on a sequential basis. Auto loan revenue was down 15% year-over-year and down 5% sequentially. Personal lending increased 14% from last year and was up 2% sequentially. Commercial banking revenue increased 15%, to $3.41 billion. Middle-market banking revenue increased 23% year-over-year, as higher interest rates and loan balances were only partially offset by lower deposits. Asset-based lending and leasing revenue was up 3% annually, a result of loan growth and increased revenue from renewable energy investments. Non-interest expenses increased 1% year-over-year but fell 5% sequentially. The annual increase came as a result of higher personnel expenses and operating costs — though, efficiency initiatives served to partially offset the increase. Corporate and investment banking revenue jumped over 21%, to $4.92 billion. Total banking revenues increased 20% year-over-year, a result of higher rates and lending revenues, along with “higher investment banking revenue on increased activity across all products.” Commercial real estate revenue increased 14% year-over-year, due to higher rates and revenue growth in the firm’s low-income housing business. Markets revenue was up 33% year-over-year, driven by structured products, equities, credit products, and foreign exchange. The increase was partially offset by reduced trading activity in rates products. Non-interest expenses increased 15% annually, due to higher operating costs and personnel expenses. But, as was the case in commercial banking, efficiency initiatives partially offset the increase. Wealth and investment management revenue advanced 1%, to $3.7 billion. NII fell 7% year-over-year, due to a decline in deposits from customers reallocating cash into higher-yielding securities, partially offset by higher rates. Non-interest income increased 5% year-over-year, a result of higher asset-based fees driven by an increase in market valuations. Non-interest expenses were up 8% annually on higher revenue-related compensation and operating costs, but were also partially offset by efficiency measures. (Jim Cramer’s Charitable Trust is long WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

A customer uses an ATM at a Wells Fargo Bank on April 14, 2023 in San Bruno, California.

Justin Sullivan | Getty Images

Wells Fargo‘s (WFC) stronger-than-expected third-quarter results and raised guidance on Friday prompted us to reaffirm our buy rating on the stock, as shares soared on the news.

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October 13, 2023

Wells Fargo follows a solid quarter, promising investors something many of them count on

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Charlie Scharf, CEO, Wells Fargo, speaks during the Milken Institute Global Conference in Beverly Hills, California on May 2, 2023. speaks during the Milken Institute Global Conference in Beverly Hills, California on May 2, 2023.

Patrick T. Fallon | Afp | Getty Images

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July 14, 2023

Earnings season is upon us. What to look out for when major banks report Friday

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Second-quarter earnings season unofficially kicks off Friday, with the first of the big banks getting on the board early. The results will be released amid increasing uncertainty in the U.S. economy. Banks are operating in a high-interest-rate environment (which can be good for profits) as the Federal Reserve mulls over further monetary tightening (which could increase the chances of a recession). At the same time, the financial sector has been recovering from the collapse of some regional lenders, which was precipitated by the March failure of Silicon Valley Bank (SVB). Wells Fargo (WFC) and Morgan Stanley (MS), our two financial holdings, will report quarterly numbers Friday and a week from Tuesday, respectively. Wall Street analysts, and the Club, will be watching a myriad of factors that could impact earnings. Banking backdrop The Fed released the results of its annual stress tests of banks’ capital buffers earlier this month. All 23 institutions tested, including Wells Fargo and Morgan Stanley, passed the exercise that simulates a hypothetical severe global recession. The stress tests, which started after the 2008 financial crisis, indicated that both firms have enough assets in their rainy day funds to weather an extreme economic downturn. Wells Fargo and Morgan Stanley announced increases in their capital returns to shareholders after clearing that regulatory hurdle. Morgan Stanley said it will increase its quarterly common stock dividend to 85 cents a share from 77.5 cents a share, along with reauthorizing a multiyear share repurchase program of up to $20 billion. Wells Fargo announced that it will raise its dividend to 35 cents a share from 30 cents a share. Meanwhile, banks are facing possible further regulation after the collapse of SVB and some other smaller financial firms earlier this year. New rules could require banks to hold as much as 20% more capital, The Wall Street Journal reported. Such a requirement could cut into revenue streams because banks may be more conservative with their lending. On top of that, funding costs for banks — interest rates paid to customers on deposits — have increased as the sector endures more outflows due to competition for funds from instruments such as bonds, money market funds, CDs, the likes of which banks have seen for years. This impacts certain banks differently, depending on the services they offer. Longtime bank analyst Christopher Whalen anticipates revenues for major banks to likely hold the line. Funding costs, however, may rise significantly. This dynamic would result in a compression of the net interest margin (NIM), which measures the difference between what banks pay on deposits and collect on loans, and therefore pressure net interest income (NII). “I think funding [costs] could double this quarter compared to last quarter, so a sequential doubling of interest expense. That’s mind-boggling,” the chairman of Whalen Global Advisor stold CNBC in an interview. “Banks are going to deal with it and others aren’t. I hate to say, but that’s the reality.” The banks that have “been really focused and have been willing to downsize and raise cash,” he added, will succeed in this macro environment. WFC YTD mountain Wells Fargo YTD performance Wells Fargo has a unique story among the major U.S. banks because of its multiyear restructuring plan. In 2021, the bank launched an initiative to improve its efficiency ratio — how much a bank’s non-interest expenses measure up to the revenue it generates. They’re aiming to realize $8 billion of gross cost savings over a roughly four-year time period, decreasing expenses by cutting branches, conducting layoffs and installing a new loan origination system. “While we expect NII to decline sequentially, WFC has pointed to a potential upside to its 10% growth target for the full year,” Barclays analysts wrote last month in a research note. “We expect an increased focus on costs looking out.” In the past, Wells Fargo has endured a slew of negative press over account scandals. The Fed levied an enforcement action in 2018 that limits Wells Fargo from managing assets worth more than $1.9 trillion. It’s unclear when the asset cap will be lifted. However, once it is (and we think it’s a when not if scenario), Wells Fargo will likely be able to generate more profits and increase its balance sheet. “They have finally cut their way through the army of zombies in terms of regulatory problems, which is time-consuming and expensive,” Whalen said, adding that Wells Fargo has likely the most upside potential out of the five major U.S. banks. MS YTD mountain Morgan Stanley YTD performance When Morgan Stanley reports, net assets in its wealth management (WM) business will be a key metric. Earlier this year, it was believed that larger banks like Morgan Stanley could benefit as many looked to move money out of smaller firms during the regional banking crisis. Investment banking (IB) has been taking hits, along with additional severance charges weighing on Morgan Stanley from a series of layoffs over the past year. “We expect a modest YoY [year over year] decline in revenues due to tough comps in trading and continued IB weakness while WM and IM [investment management] provide ballast. Deposit balances and their impact on NII will also be a focus. Still, we expect MS to reiterate its 20%+ long-term ROTCE target with continued progress on its $20bn share buyback plan,” according to Barclays analysts in June. ROTCE stands of return on average tangible common shareholders’ equity. More simply, a measurement of the bank’s ability to generate a return on its book — net assets on its balance sheet. Bottom line We want to hear how banks are thinking about looming capital requirement hikes. (If the rule is implemented, this could reduce further loan growth for both MS and WFC.) What do managements have to say about how a 20% increase may impact their individual books, along with the economy and banking sector more broadly? What about deposits? Have there been increased outflows over the last quarter? If so, have these stabilized? Is more money coming in from smaller firms to the majors following a crisis of confidence in the regional banking sector earlier this year? Wall Street still doesn’t have a clear picture of what the Fed’s rate hike campaign will look like in the future. After pausing in June, there’s a 92% chance central bankers will deliver another 25-basis-point hike at their next policy meeting later this month, according to the CME FedWatch Tool . We want to know how management may navigate a more competitive environment for cash and cash equivalents. Why should an investor leave their money in certain offerings with Wells Fargo or Morgan Stanley, for example, if yields for government bonds are rising higher? Overall, we’re using all this information to help shape our second-half outlook for the Club’s portfolio. (Jim Cramer’s Charitable Trust is long WFC and MS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

A combination file photo shows Wells Fargo, Citibank, Morgan Stanley, JPMorgan Chase, Bank of America and Goldman Sachs.

Reuters

Second-quarter earnings season unofficially kicks off Friday, with the first of the big banks getting on the board early. The results will be released amid increasing uncertainty in the U.S. economy.

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July 10, 2023

Big bank earnings season is over. Here’s how our stocks stack up against peers

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Big bank earnings are behind us. After hearing from the nation’s biggest institutions over the past couple weeks, we can breath a sigh of relief: They were better than feared. Many investors were understandably worried about the banking sector heading into this first-quarter earnings season following the collapse of Silicon Valley Bank (SVB) and two other U.S. lenders in March. But the biggest worry — that a flight of deposits from regional institutions to “too big to fail” banks would destroy investor sentiment — never happened. As a result, we’ve been able to focus solely on company fundamentals and what they may foretell about the economy and markets. Banks provide a inside look at the state of the consumer, specifically savings and credit levels, which in turn show how well positioned the consumer is to ride out an economic slowdown. Here are our winners for the two main segments of the sector, and how they compare to our two bank holdings in the Charitable Trust. We tried to take a holistic approach, using factors such as reported results versus expectations, historical performance, and absolute metrics within the peer groups. Investment banks Goldman Sachs (GS) and Club holding Morgan Stanley (MS) are the two pure-play investment banks we care about. They mostly provide services to large corporations and institutional investors (Citigroup and JPMorgan also have divisions that do this, but we put them in money center group since they also accept deposits and make loans to regular consumers and small businesses.) Of the two, Morgan Stanley posted the better first-quarter results, beating on both the top and bottom lines; Goldman missed on sales but beat the Street’s estimate for profits. Both investment banks, however, oversaw declines for both headline numbers. This just isn’t a good economic environment for investment banks, given the lack of initial public offerings and M & A activity; these banks collect huge fees shepherding deals for their clients. Goldman beat Morgan Stanley on one key metric: return on tangible common equity (ROTCE), which measures the bank’s ability to generate a return on its book (assets on balance sheet). Morgan Stanley had a better absolute number, but Goldman beat expectations. During earnings season, it’s all about beating expectations; as longer-term investors we value Morgan Stanley’s stronger performance (expectations aside) as it serves to support a more premium valuation. The exact opposite can be said for the efficiency ratio: Goldman put up a better number but missed expectations, while Morgan Stanley’s result edged out the consensus expectation (see chart 1). Goldman had a much larger annual jump in its efficiency ratio, which we never like to see; lower is better on this front. Also working to Morgan Stanley’s advantage is the better-than-expected result we got on the non-interest revenue line. Morgan Stanley also had $110 billion of net new assets come into the firm during the quarter, nearly double the $57 billion at Goldman This indicates Morgan Stanley management’s ongoing effort to diversify the business is working — and makes it the investment bank best-positioned to ride out an economic downturn. Money center banks JPMorgan Chase was the clear-cut winner of the four main commercial banks this earnings season. It put up the best numbers versus expectations and and in many cases — sales, earnings, annual growth, the efficiency ratio, ROTCE — on an absolute basis (see chart 2). Our runner-up is Wells Fargo (WFC). The Club name reported the second-best annual sales and earnings growth of the group, the greatest efficiency ratio improvement, and by far the strongest net interest margin on an absolute basis. Of special note: Wells Fargo was the only big bank to see non-interest expense actually decline versus the year-ago period. Third place was tight, but the combination of better earnings growth and a significantly better ROTCE made Bank of America (BAC) the better performer. Citigroup (C) had a better net interest margin, but its earnings didn’t look quite as good after excluding divestiture-related impacts and the bank’s ROTCE was below its peers. Sizing up bank valuations Morgan Stanley is currently trading at a premium at 13.7 times forward earnings, compared to 10.3 for GS. That valuation is warranted given the recent results, its premium ROTCE profile and management’s execution of things it can control. Recent acquisitions E-Trade and Eaton Vance are also gathering reporting solid growth in gathering assets. Goldman, on the other hand, still seems to be searching for direction in regard to its consumer business Marcus — especially now that partner Apple (AAPL) has launched its own, higher-yielding savings account with the bank. This could cause some cannibalization though management doesn’t believe it to be a major risk . Morgan Stanley also boasts a better dividend yield, paying us to wait until investment banking activity returns. For the commercial banks, JPMorgan unsurprisingly has the highest valuation at 9.9 times forward earnings and 2.2 times tangible book value, a valuation metric for banks. It also has the lowest dividend yield. JPM is the premium name of the sector. Wells Fargo and Bank of America have similar valuations — both at 8.8 times forward earnings. BAC has a higher dividend yield, but Wells Fargo has a lower P/TBV valuation. We’re sticking with Wells Fargo because it has more room for improvement on expenses. The eventual removal of the just over $1.9 trillion asset cap imposed by the Federal Reserve in 2018 in response to several scandals at the bank could be a very positive catalyst. This would free the bank to issue additional loans and ultimately return more cash to shareholders. Both things will improve the bank’s ROTCE and efficiency ratio. Citigroup’s big beat on earnings has to be taken with a grain of salt because sentiment on the name is about as bad as it gets. The current valuation of 8.1 times forward earnings and its 0.6 times tangible book value support that view. On the bright side, you are getting a pretty hefty dividend yield. We would still rather pay up a little for Wells Fargo thanks to the self-help nature of our investment thesis (cost reductions, actions to please regulators), especially at a time of so much macroeconomic uncertainty. Citigroup is currently trading below tangible book value — usually an absolute steal. However, if you bought Citigroup in the past decade based on the P/TBV being below 1, you’ve learned the hard way about how frustrating it can be to own a “value trap.” With a few pops here and there, this bank has largely traded below tangible book value going back to the Great Financial Crisis of 2007-2009. The reason for this valuation is largely tied to the bank’s poor ability to generate a return on tangible common equity. The book of business is worth more if management can generate a greater return on it. JPM has by far the best ROTCE and highest P/TBV multiple, then comes Bank of America, followed by Wells Fargo and finally Citigroup. The same is true for the investment banks. Morgan Stanley sports a high ROTCE, supporting its premium valuation multiple. (See here for a full list of the stocks in Jim Cramer’s Charitable Trust.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Morgan Stanley Chairman and Chief Executive James Gorman speaks during the Institute of International Finance Annual Meeting in Washington, October 10, 2014.

Joshua Roberts | Reuters

Big bank earnings are behind us. After hearing from the nation’s biggest institutions over the past couple weeks, we can breath a sigh of relief: They were better than feared.

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April 23, 2023

Morgan Stanley delivered a solid quarter, despite gathering macroeconomic clouds

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Club holding Morgan Stanley (MS) reported better-than-expected first-quarter results on Wednesday, even as the stock came under pressure due to rising expenses. But the results, including stellar non-interest income, were impressive in a challenging economic environment. Revenue declined 2% year-over-year, to $14.52 billion, but outpaced analysts’ expectations of $13.92 billion, according to estimates compiled by Refinitiv. Earnings-per-share dropped by 16% annually, to $1.70, but exceeded the $1.62 per share forecasted by analysts, Refinitiv data showed. Morgan Stanley stock initially tumbled nearly 4%, before reversing some of those losses to rise just under 1% in afternoon trading Wednesday, to about $90.50 a share. Bottom line An increase in provisions for credit losses and higher-than-expected compensation expenses weighed on shares early in Wednesday’s session — but Morgan Stanley, nonetheless, reported a solid first quarter. Notably, the increase in provisions was due to pressure in the commercial real estate market, the deteriorating macroeconomic outlook and a higher estimate for the Federal Reserve’s main interest rate, all of which are out of management’s control. Net interest income came in a tad short versus expectations, but we’re more focused on the better-than-expected results coming from the non-interest income side of the business. That income — the bulk of which is generated in the wealth management division — is fee-based, which makes it less volatile because it’s not reliant on interest-rate fluctuations. As a result, it stands to support a higher valuation multiple, given the consistent, recurring revenue. Institutional securities were down annually, a result of lower underwriting and M & A activity. But the management team said Wednesday they’re already seeing growth in the M & A pipeline and “some spring-like signs of new issuance emerging,” though the real rebound won’t be realized until the second half of 2023 and into 2024. Asia was a bright spot for institutional securities, delivering its third-highest quarter on record, driven by Japan and China’s economic reopening. In the wealth management division, the bank was able to pull in about $110 billion in net new assets for the quarter. Morgan Stanley aims to grow net new assets by $1 trillion every three years, which amounts to about $333 billion per year. That makes $110 billion in the first quarter a solid start to achieving that nearer-term goal, ahead of the bank’s longer-term objective of amassing $10 trillion in client assets. We were also pleased to hear management cite positive international momentum at its investment management division, helped by its acquisition of asset management firm Eaton Vance. Despite a difficult operating environment, Morgan Stanley remains a best-in-class investment bank. As the macroeconomic picture improves, we expect the bank to be able to expand top-line growth and reduce expenses. We maintain a 2 rating on the stock — meaning we would wait for a pullback before buying up more shares — and a price target of $105 per share. In the meantime, we’re content to collect the 3.5% yield the stock currently offers, while management leverages the lower price to repurchase more shares. Segment results Institutional securities Investment banking revenues contracted as a result of lower advisory fees in connection with reduced M & A activity; a decline in equity underwriting revenues due to lower initial public offering volumes; and a fall in fixed-income underwriting revenues as a result of fewer non-investment grade loan issuances. Equity revenues were down on lower volumes and global equity market declines. Fixed income revenue suffered from a decline in commodity prices and foreign exchange-related revenues. Total expenses fell 2.3% annually, to $4.72 billion, while provisions for credit losses increased to $189 million, from $44 million a year ago. The increase in provisions reflects the growing risks being seen in the commercial real estate market and worsening macroeconomic outlook. Wealth management Asset management revenue was down on lower asset levels, due to market declines. Transactional revenue was up nicely on a reported basis, but fell 12% annually when including the impact of mark-to-market gains on investments associated with deferred compensation plans. Net interest income was higher on the back of rising interest rates and lending growth. Total expenses for the segment increased 10.4% annually, to $4.8 billion, while provisions for credit losses increased to $45 million, up from from $13 million a year ago, due to the firm’s worsening macroeconomic outlook. Notably, the bank added roughly $110 billion in net new assets in the first quarter, $20 billion of which management believes was the result of outflows from regional banks following the collapse of Silicon Valley Bank last month. Management noted that the regional banking crisis in the U.S., coupled with rising interest rates over the past year, resulted in a 3% decline in deposits in the first quarter. That was, in part, due to clients increasing their allocations to cash equivalents like money market funds and U.S. Treasurys by over 60% year-over-year. Roughly 23% of client assets are being held in these cash-like securities, well above the roughly 18% level seen historically, management said Wednesday. Investment management Asset management and related fees fell as a result of lower assets under management, which were hit by lower asset prices and outflows. Performance-based income and other were up, in part due to mark-to-market gains on investments connected with deferred compensation plans. Total assets under management fell largely as a result of lower asset values compared with a year ago. Total expenses for the segment increased 1.4% annually, to $1.12 billion. Capital returns Morgan Stanley repurchased 16 million shares in the first quarter, at an average purchase price of $95.16 per share, resulting in a return of capital to shareholders of $1.5 billion. There is about $14.25 billion remaining under the current buyback authorization, as of the start of the second quarter. Looking ahead, the board authorized a quarterly dividend of nearly 78 cents per share. (Jim Cramer’s Charitable Trust is long MS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

The Morgan Stanley headquarters building is seen on January 17, 2023 in New York City.

Michael M. Santiago | Getty Images

Club holding Morgan Stanley (MS) reported better-than-expected first-quarter results on Wednesday, even as the stock came under pressure due to rising expenses. But the results, including stellar non-interest income, were impressive in a challenging economic environment.

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April 19, 2023

Wells Fargo gives up gains despite earnings beat. We see a buying opportunity

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Wells Fargo (WFC) reported better-than-expected first-quarter results on Friday, demonstrating its underlying fundamentals are strong. And the subsequent drop in share price is simply an opportunity for investors to buy up the stock. Total revenue advanced 17% year-on-year, to $20.73 billion, exceeding analysts’ expectations for $20.08 billion, according to estimates compiled by Refinitiv. Earnings-per-share of $1.23 came in well above the consensus estimate of $1.13 per share, Refinitiv data showed. Shares of Wells Fargo initially climbed more than 2% following the earnings release, before giving up most of those gains. Wells Fargo stock was trading down around 0.2% Friday afternoon, at $39.58 a share. Bottom line Though deposits and loans came in below expectations, those misses were more than offset by better-than-expected results on the net interest margin — which continued to benefit from higher interest rates — and return on tangible common equity and efficiency ratios. The bank’s common equity tier-1 ratio (CET1) improved on both a sequential and annual basis, supporting the repurchase of $4 billion worth of stock in the first quarter. Given the bank’s CET1 ratio remains comfortably above the regulatory minimum – and its liquidity coverage ratio is 22% above the regulatory minimum – the bank is sufficiently well-capitalized to pay out further cash returns to shareholders. Wells Fargo said it saw some benefit from deposit inflows in the wake of the collapse of Silicon Valley Bank (SVB) last month, but added that those have since abated. Wells Fargo management also noted that, like many other regional banks, it has a much broader business model and more diversified sources of funding than a bank like SVB. Meanwhile, consumer spending was strong through most of the first quarter, according to Wells Fargo management, with growth in both credit and debit usage, before softening in the latter part of the three months ended March 31. Despite an increase in provisions for credit losses, most of the bank’s business areas remain strong with little change in trends seen in the prior quarter and no meaningful update to its economic outlook. Still, management said it’s carefully monitoring any potential deterioration in asset classes or customer segments, noting that the commercial real estate market is under pressure. The bank has accordingly tightened lending standards on high-risk areas of that market. Looking ahead, Wells Fargo reiterated its guidance for net interest income (NII) and non-interest expenses for 2023 — welcomed news given the uncertainty that’s arisen in the banking sector since that guidance was first provided. That management was not forced to trim its outlook in the current environment is also a sign the guidance was conservative from the start. This quarter goes to show that the underlying fundamentals of Wells Fargo are strong, and only getting better as management continues to execute on cost-saving initiatives and works to resolve outstanding regulatory challenges. Ultimately, we find the stock decline on this report to be unwarranted and believe it represents a buying opportunity. Segment details Consumer banking and lending Consumer and small business banking (CSBB) revenue increased 28% year-over-year, as higher rates were only partially offset by lower deposits. Within consumer lending, home lending was down 42% from last year, while credit card revenue increased 3% annually. Auto loan revenue was down 12% year-over-year and personal lending increased 9% from last year. Commercial banking Middle market banking revenue increased 73% year-over-year, as higher interest rates and loan balances were only partially offset by lower deposits. Asset-based lending and leasing revenue was up 7% annually, as loan growth was partially offset by lower net gains from equities. Noninterest expenses increased 14% year-over-year, primarily due to higher personnel expenses and operating costs — though, efficiency initiatives served to partially offset the increase. Corporate and investment banking Total banking revenues increased 37% year-over-year, a result of higher interest rates and lending revenue on higher loan balances. Investment banking fees were down, given lower market activity. Commercial real estate revenue increased 32% year-over-year, due to higher interest rates and loan balances. Markets revenue was up 53% year-over-year, driven by higher trading revenue across all asset classes. Non-interest expenses increased 12% annually, due to higher operating costs and personnel expenses. But, as in commercial banking, efficiency initiatives served to partially offset the increase. Wealth and investment management Net interest income jumped 31% year-over-year, due to higher interest rates. But that figure was partially offset by a decline in deposits from customers reallocating cash into higher yielding securities. Non-interest income, however, fell 11% year-over-year, a result of lower asset-based fees driven by a decline in market valuations. Non-interest expenses fell 4% annually, primarily due to lower revenue-related compensation and efficiency initiatives. 2023 outlook Wells Fargo maintained its full year 2023 forecast for NII to be roughly 10% higher in 2023 than the $45 billion seen in 2022, implying a result of roughly $49.5 billion. The bank also reiterated its non-interest expenses guidance for 2023, at about $50.2 billion. That represents a roughly $100 million decrease on 2022 expenses (excluding the impact of $7 billion in operating losses in 2022 and an expectation for $1.3 billion in “ongoing business-related operating losses in 2023”). It remains a welcomed target, given many competitors’ plans for higher expenses in 2023. (Jim Cramer’s Charitable Trust is long WFC. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

Smith Collection/Gado | Archive Photos | Getty Images

Wells Fargo (WFC) reported better-than-expected first-quarter results on Friday, demonstrating its underlying fundamentals are strong. And the subsequent drop in share price is simply an opportunity for investors to buy up the stock.

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April 14, 2023

This Friday could hold the key to our bank stocks and the direction of the market for weeks

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The countdown is on. Earnings season is set to kick off Friday with the banks, one of ours among them. The whole sector came under heavy pressure last month after the collapse of Silicon Valley Bank. How the banks deliver could set the market tone in the coming weeks. Much of this mini-banking crisis ties back to the Federal Reserve’s war on inflation, with the rapid rise in interest rates pressuring loan values and increasing competition for deposits. Central bankers are not solely at fault for what happened at SVB on March 10 as management there was clearly out to lunch. But many economists feel the Fed does share some blame for keeping money so cheap for so long coming out of the Covid pandemic and subsequently having little choice but to hike interest rates at a breakneck speed to thwart spiraling prices. Currently, another quarter-point rate hike is widely expected at the Fed’s May meeting. However, there’s a growing minority who believe the recent banking stumbles should keep the Fed on hold. Jim said Monday that such a pause could spark a big stock market rally while keeping rates high enough for banks to make money. But, first things first. Ahead of Friday’s bank reports, which include first-quarter numbers from Club holding Wells Fargo (WFC), we’re watching three main things: the mix of deposits and loans and the resulting money made on the difference in the form of net interest margin (NIM). How these dynamics play out will factor into the Fed’s next rate move — and as a result, market sentiment. Deposits The chilling effect of the Silicon Valley Bank failure has been palpable. As highlighted by Jim Cramer in his Sunday column , total U.S. commercial banking deposits dropped by nearly $65 billion on a seasonally adjusted basis for the week ended March 29 , nearly three weeks out from SVB’s failure. That’s 10 straight weekly declines , according to bank assets and liabilities data from the Fed. It’s a harsh reminder that accounts in excess of $250,000 are not protected by the FDIC (Federal Deposit Insurance Corporation). Not to mention, withdrawing money without warning has never been as frictionless as it is today — thanks to online and mobile banking. (It’s worth noting the government has backed all deposits at failed banks and has said it stands ready to help elsewhere if needed.) Since deposit levels directly contribute to a bank’s ability to make loans, it’s not surprising that commercial bank lending declined in recent weeks. While the roughly $45 billion drop for the week ended March 29 was less than the $60 billion decline the prior week, it was still indicative of financial tightening. Focusing on deposits at the major banks when they issue their quarters — specifically Wells Fargo, which we think is reasonable to believe saw inflows during the tumult— will signal their overall health and whether they’re in a position to ease up or lock down lending standards. Lending As a result of the sub-optimal deposit situation, lending is taking a hit because banks must maintain certain capital levels. To put a finer point on the bank lending slowdown, Bloomberg looked at the roughly $105 billion decline from the week ended March 15 to March 29 and found it was the largest two-week drop since the central bank started tracking these figures in 1973. That’s a double-edged sword. If money is harder to come by, then anything purchased with a loan such as a car or a home is going to see demand fall. That, in turn, can put pressure on the broader U.S. economy, two-thirds of which is fueled by consumer spending. Again, it’s the kind of slowdown the Fed has been trying to engineer but not at the expense of further hurting the banks just as the sector started to find its footing since the SVB-driven debacle. It could be that we’ve seen all the financial institution tightening that we need to see given that on a seasonally adjusted basis, the average residual (assets minus liabilities) across all U.S. commercial banks in March is on par with the average we saw in February before SVB blew up. However, that’s going to depend largely on deposit dynamics, which rely on confidence in the banking system and how competitive savings account rates are in comparison to high-yielding short-term CDs, money markets or Treasurys. Net interest margin The difference between what a bank pays depositors in interest compared to what they charge customers for loans determines its net interest margin, also known as NIM. Banks generate interest income by borrowing at a lower rate (think deposits/liabilities) and lending at a higher rate (think home mortgages/assets). They have the flexibility to some extent, based on market forces, to tweak that equation. They could always incentivize deposits by raising the rates they’re willing to pay account holders to prevent them from bolting. But in doing so they would have to accept a smaller profit. Wall Street hates that. On the flip side, to protect NIM and net interest income (NII) in a tighter banking environment, financial institutions may have to keep deposit rates relatively low versus alternatives — which means deposits are harder to come by — or raise the rates they charge on loans, making them less affordable and negatively impacting demand for the goods purchased with those loans. Bottom line This is obviously a tough setup for the banks and makes them difficult to invest in. As a result, the reason we are in Wells Fargo has less to do with the operating environment and more to do with it being a self-help story with turnaround catalysts in the form of achieving regulatory milestones. To be sure, Wells is a traditional bank that must deal with short-term deposit and lending gyrations. But we think it’s pretty solid from the deposit side — and by virtue of its higher capital controls, it can’t go crazy giving out loans. As for Club holding Morgan Stanley (MS), which reports its quarter next week, we value management’s focus on fee-based wealth management revenue and investment banking operations. Given this setup, we are comfortable with our slightly greater than 7% cash position in the Club portfolio, believing that a Fed pause would cause a rally. On the other hand, a more dogmatic Fed would prove harsh for the market overall but benefit the tech sector, which is still working through cost cuts and can put still put out growth against a slowing economy. Once again, it comes down to owning a diversified portfolio that provides areas to book profits and buy into weakness no matter the market environment. (Jim Cramer’s Charitable Trust is long WFC, MS. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . NO FIDUCIARY OBLIGATION OR DUTY EXISTS, OR IS CREATED, BY VIRTUE OF YOUR RECEIPT OF ANY INFORMATION PROVIDED IN CONNECTION WITH THE INVESTING CLUB. NO SPECIFIC OUTCOME OR PROFIT IS GUARANTEED.

People walk past a Wells Fargo branch on January 10, 2023 in New York City.

Leonardo Munoz | View Press | Corbis News | Getty Images

The countdown is on. Earnings season is set to kick off Friday with the banks, one of ours among them. The whole sector came under heavy pressure last month after the collapse of Silicon Valley Bank. How the banks deliver could set the market tone in the coming weeks.

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April 11, 2023

Tag: club earnings