JPMorgan Chase & Co – Page 11

Goldman Sachs is set to report first-quarter earnings — here’s what the Street expects

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David Solomon, chief executive officer of Goldman Sachs Group Inc., during a Bloomberg Television at the Goldman Sachs Financial Services Conference in New York, US, on Tuesday, Dec. 6, 2022.

Michael Nagle | Bloomberg | Getty Images

Goldman Sachs is scheduled to report first-quarter earnings before the opening bell Tuesday.

Here’s what Wall Street expects:

Earnings: $8.10 per share, 25% lower than a year earlier, according to Refinitiv.
Revenue: $12.79 billion, 1.1% lower than a year earlier.
Trading Revenue: Fixed Income $4.16 billion, Equities $2.9 billion, per StreetAccount.
Investing Banking Revenue: $1.44 billion

How did Goldman’s traders perform last quarter?

The answer to that question will determine whether Goldman exceeds or misses expectations for the first three months of this year.

Unlike its more diversified rivals, Goldman gets the majority of its revenue from Wall Street activities including trading and investment banking. With the advisory business remaining subdued because the IPO window remains mostly shut, it’s up to traders to pick up the slack.

Heading into the quarter, analysts wondered whether turmoil during March — in which two American banks failed and a global investment bank was forced to merge with a longtime rival — would provide a good or bad backdrop to trading.

That question was seemingly answered by JPMorgan Chase and Citigroup, both of which beat estimates in part because of better-than-expected fixed income trading. Goldman has one of the biggest bond shops on Wall Street, so expectations are high.

So far this earnings season, big banks have mostly outperformed their smaller peers, helped by an influx of deposits after Silicon Valley Bank’s meltdown. But since retail banking plays a small — and probably shrinking — role at Goldman, much more focus will be on how trading and investment banking fared, and what expectations are for later this year.

Separately, analysts will want to hear what has come of CEO David Solomon’s proclamation in February that Goldman was weighing “strategic alternatives” for its consumer platforms business. That has been interpreted as potentially selling off the GreenSky business it acquired recently or offloading credit-card partnerships with Apple and others.

And they’ll likely ask for details about Goldman’s part in helping Apple offer new savings accounts; the product launched with a higher interest rate than the bank’s own Marcus product has.

Goldman shares have dipped 1.1% this year before Tuesday, a better showing than the nearly 17% decline of the KBW Bank Index.

Last week, JPMorgan Chase, Citigroup and Wells Fargo all topped profit expectations amid rising rates. Morgan Stanley is scheduled to release results Wednesday.

This story is developing. Please check back for updates.

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April 17, 2023

CNBC Daily Open: Don’t be fooled by big banks’ earnings

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Workers erect a construction barrier in front of JPMorgan Chase & Co. headquarters in New York, U.S., on Friday, Jan. 11, 2019.

Michael Nagle | 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.

On Friday three big U.S. banks reported better-than-expected first-quarter earnings. But investors realized this wasn’t an unambiguously good sign for markets.

What you need to know today

JPMorgan Chase, Wells Fargo and Citi reported earnings Friday. All three big U.S. banks handily beat profit and revenue expectations. JPMorgan’s numbers were the most impressive, with profit surging 52% in the first quarter.

U.S. markets fell Friday as weak retail sales overshadowed banks’ stellar earnings. Asia-Pacific stocks were mixed Monday. China’s Shanghai Composite rose 1.21% on the back of two pieces of good news: The country’s economy is expected to expand 4% in the first quarter, and its home prices grew the fastest, month over month, in almost two years.

PRO Markets this week will mostly be influenced by earnings reports, writes CNBC Pro’s Scott Schnipper. One important tip: Investors shouldn’t assume all better-than-expected numbers are good — because earnings forecasts have been negative for so long.

The bottom line

Investors weren’t misled by big banks’ bonanza of incredible earnings.

Yes, profit and revenue for all three banks that reported Friday rose compared with a year earlier. JPMorgan reported a record revenue of $39.34 billion, a 25% jump that beat analysts’ estimate by more than $3 billion. Wells Fargo’s revenue popped 17%, and Citi’s rose 12%.

Investors rewarded the banks for their sterling balance sheets: JPMorgan soared 7.55% and Citi added 4.78% — though Wells Fargo dipped 0.05%, not because its numbers were bad but, I suspect, because it didn’t beat Wall Street expectations as much as the other two banks.

Why were the figures so good? They had to thank rising interest rates, which allow banks to charge more for loans they make, while keeping the interest on saving accounts low. Banks pocket the difference, which is known as net interest income. It seems banks will continue benefiting from today’s high interest-rate environment: JPMorgan predicted net interest income will be $7 billion more than the bank had previously forecast.

But high interest rates are a double-edged sword. Even though higher rates fueled big banks’ earnings, they also expose weaknesses in balance sheets, as Dimon himself warned. This means that regional banks, lacking the financial heft of bigger ones to cushion possible losses — that’s essentially how SVB failed — might not have such good news to share when they report earnings next week.

In other words, what’s good for big banks’ income is not necessarily good for the economy. Indeed, data released Friday showed the economy is slowing down. Retail sales in March declined 1%, two times more than economists had expected, according to an advanced reading. Citigroup CEO Jane Fraser said on an investor call that the bank saw a “notable softening” in consumer spending this year.

Despite the excitement over the big banks’ earnings, then, investors kept a cool head, causing the three major indexes to fall. The S&P 500 lost 0.21%, the Dow Jones Industrial Index slid 0.42% and the Nasdaq Composite fell 0.35%.

Further earnings this week will give investors a clearer sense of markets.

Here are some key reports to look out for: Charles Schwab on Monday; Bank of America, Goldman Sachs and Netflix on Tuesday; Morgan Stanley, IBM and Tesla on Wednesday; American Express on Thursday; Procter & Gamble on Friday. By the end of this week, investors should know if the disconnect between a profitable corporate America and a flagging economy is limited to big banks — or if it’s another side effect of the strange times we live in.

Subscribe here to get this report sent directly to your inbox each morning before markets open.

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April 16, 2023

Here’s what I want to see before buying in a stock market that stumbled on solid bank earnings

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We just had three fantastic quarters from three disparate banks, and I didn’t read a good word about them. Think about this. JPMorgan (JPM) reported such an outstanding quarter that I had to read it twice to believe how it could possibly have been that good to rally this very big-cap stock by almost $10-per-share. Almost $10. This is not some tech stock beating faux estimates and being loved by idolatrous research analysts. This is JPMorgan, like the House of Morgan. I have not liked the stock of Citigroup (C) after it began to diverge immensely from its tangible book value (TVB). I do not understand how it could be double the price of the stock when the TVB means that if you closed the bank that’s what you would get. Hmmm, you buy Citi at $50 per share and you get almost a double if CEO Jane Fraser decides to close it? I don’t think so. Put aside that nagging oddity for a second and you have to be impressed with the quarter. I would go as far as to say that Citi seems to become just plain cheap, especially if it sells Banamex, one of Mexico’s biggest banks, for a good price. Looks like the celebration of the far-flung is, at last, joyously over. I know the stock of Wells Fargo (WFC) didn’t do much after it reported. That was just a wrong reaction. The bank, a core position of my Charitable Trust, really did beat the top and bottom line quarterly numbers handily, bought back $4 billion in stock — and yet, it added so much more capital that it has more than it did before the buyback started. It’s oozing with cash. WFC YTD mountain Wells Fargo YTD peformance More important, Wells Fargo is almost done peeling back the regulatory onion. It has had to spend fortunes in fines and technology and risk management hires that I can’t believe it had such a good efficiency ratio, a number I regard as important as all of those net interest income and margin numbers that everyone is so possessed about. Those were, of course, great, too, but that’s simply a question about how stupid the deposit base is. The dumber the base the less likely it is to leave for greener pastures. Wells Fargo’s base seems pretty dumb, but we might see dumber this week. Now, I offer the story of these banks as a preamble to what I see happening in the stock market right now. Bank stocks are notorious underperformers in the aggregate and have been labeled uninvestable by many including, at times, yours truly. That’s because they have become trading vehicles. They screw up too often. Which is why Friday was so remarkable. Bank trading is like playing Russian Roulette with three bullets. Usually, half are going to blow your head off. Instead, we went three for three. Have bank CEOs suddenly become the most brilliant CEOs in the world? No. But this is one special moment for the U.S. economy. First, you have everyone running scared, which is, by nature, good news because banks make far fewer mistakes when they run scared. And, they are making far fewer mistakes. Second, all three showed that the American consumer is still pretty flush and is not living beyond their means. There’s a little increase in bad debt, but nothing like we used to see before Covid. Maybe the aftermath of the pandemic has introduced still one more new wrinkle on the financial landscape: people want to spend but they don’t want to go broke. Third, this commercial real estate boogie man, while real, may not be real for those who know how to lend. We spill barrels of ink, or billions of characters, on how commercial real estate is the graveyard we whistle past or the most hated cliche of my era, the canary in the coal mine, and we never talk about who owns the bad loans on “Class C” and “D” buildings. I know who doesn’t: these banks. Now, I know the cynic says that the grade is in the eye of the beholder. That’s just not true, though, because what these companies do, quite cleverly, is describe where these buildings are because what seems to matter most is density. If there is a shortage of real estate then a not-so-hot piece of real estate earns a “B”, not a “C” or “D”. Yes, that’s me talking, but if you want to go over every building that has a loan that’s current and decide that it isn’t, well, don’t own any banks, period. Finally, there’s a really interesting backfire going on here with what the Federal Reverse is accomplishing, and it’s not all bad. The pandemic produced savers with miserable savings rates. Now these same savers are getting very big, safe, returns on their capital. Their frugality — except, I think we will find when they are on vacation — is matched by their better returns on their holdings. Sure, Wall Street snobs will laugh at those who have $100,000 and are now picking up a few extra percent. But these are the same jackasses who live six months and a day next to The Breakers resort in Palm Beach, Fla., where a dozen stone crabs cost $779 and they don’t mind. So, what they heck to do they know? This brings me back to the most important point of what happened Friday: Our worst fears about spiking bad loans of the auto, credit and home variety didn’t come true and therefore won’t come true this coming week. Amazingly, like the “stays-in-Vegas” cliche — what happened at a bank that loaned against pre-IPO companies while investing at a moronic part of the bond market yield curve, seems to have stayed at Silicon Valley Bank. Or, at least, it has stayed long enough that if there is another bank failure, there’s been plenty of time to come up with a plan. I don’t want to conflate a day of good bank earnings with a month of good stock prices. We are still overbought and are now getting less overbought, which is actually a time when stocks tend to go down. We also know that there are so many people who like to talk about the Fed that there will be a steady drumbeat of negativity. The Fed never inspires positivity — and if you ever say that it does, you are branded an idiot rather quickly. But if are going to name-call, I can tell you that the only thing easier to opine on without doing any homework besides politics is the Federal Reserve. Can there be any other explanation why recently you could go from a prediction of a 50-basis-point interest rate hike, to a 25-basis-point hike, to no hike, to a possible emergency cut, then back to no hike and then all the way back to a 25-basis-point hike, and still be taken seriously? Only if everyone is telling the same idiotic tale. Still, because we live and die by Fed chatter, you can’t rule out some rollercoaster action, not in the plain vanillas that define the week ahead— from the likes of Club holdings Johnson & Johnson (JNJ) on Tuesday, Morgan Stanley (MS) on Wednesday and Procter & Gamble (PG) on Friday — but in the over $500 billion club of techs that always manage to be at the forefront of stock despair. Not economic despair. Just stock despair. Bottom line Maybe that’s why nothing is grabbing us right now, nothing new, nothing exciting. It’s not like we demand lower prices, but believing that things aren’t as terrible as we thought and deciding to put money to work should not be confused. I think it’s fair to say that earnings could ratify prices not necessarily boost them, so why not wait for better prices for more committing of capital? We have made our sales. We have our cash. I am not asking for Dollar Tree pricing (the store, not the stock). But would a bit of a discount from Hermes and Vuitton be too much to ask? (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.

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

Leonardo Munoz | View Press | Corbis News | Getty Images

We just had three fantastic quarters from three disparate banks, and I didn’t read a good word about them.

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April 16, 2023

Should investors buy regional bank stocks? A bull and a bear weigh in — and share 3 top picks

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April 16, 2023

CNBC Daily Open: Don’t be misled by the big banks

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JPMorgan Chase & Co. headquarters in New York, US, on Wednesday, Jan. 18, 2023.

Gabby Jones | 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.

On Friday three big U.S. banks reported better-than-expected first-quarter earnings. But investors realized this wasn’t an unambiguously good sign for markets.

What you need to know today

JPMorgan Chase, Wells Fargo and Citi reported earnings Friday. All three big U.S. banks handily beat profit and revenue expectations. JPMorgan’s numbers were the most impressive, with profit surging 52% in the first quarter.

PRO Markets this week will mostly be influenced by earnings reports, writes CNBC Pro’s Scott Schnipper. One important tip: Investors shouldn’t assume all better-than-expected numbers are good — because earnings forecasts have been negative for so long.