Bank Stocks: JPMorgan, Goldman Sachs Earnings Crush Views; Wells Fargo Also Beats



JPMorgan Chase (JPM) and Goldman Sachs (GS) crushed first-quarter forecasts Wednesday, with Wells Fargo (WFC)  also beating estimates.


Big bank stocks are on the upswing again buoyed by Biden’s massive stimulus package and the continued vaccine rollout. Treasury yields are picking up too, with the 10-year rate above 1% again. Investment banking activity is also brisk as SPACs explode, while trading desks benefited from a surge in volatility in Q1.

JPMorgan Earnings

Estimates: Zacks Investment Research analysts expected EPS to nearly triple to $3.05 from the same quarter last year, on revenue of $30.07 billon, a 6.4% increase.

Results: JPMorgan earnings skyrocketed 477% to $4.50 a share. Revenue climbed to $33.12 billion. But earnings got a big boost from JPMorgan releasing $5.2 billion from credit loss reserves.

Consumer banking revenue fell 10% to $6.7 billion. Investment banking revenue more than tripled to $2.9 billion. Fixed income trading revenue grew 15% to $5.8 billion, and equities trading revenue jumped 47% to $3.3 billion. Commercial banking rose 11% to $2.4 billion. Asset management revenue swelled 20% to $4.1 billion.

Stock: Shares fell 0.9%% to 152.89 in premarket trading on the stock market today. JPMorgan stock is in a four-weeks-tight pattern with a 161.79 entry, according to MarketSmith chart analysis. This is a follow-up buying opportunity because it follows a proper buy point from a base pattern. In this case, JPMorgan stock had a previous buy point of 141.20 from a cup base.

“With all of the stimulus spending, potential infrastructure spending, continued Quantitative Easing, strong consumer and business balance sheets and euphoria around the potential end of the pandemic, we believe that the economy has the potential to have extremely robust, multi-year growth,” CEO Jamie Dimon said in a statement Wednesday.

Last week, he wrote in a letter to shareholders that big banks face a major threat from fintech rivals, as banks play a smaller role in the financial system.

He also said stock market valuations are “quite high,” thanks to excess savings making it into equities. Dimon sees the U.S. economy booming into 2023, but added that tougher times are ahead. 

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Goldman Sachs

Estimates: Analysts see Goldman Sachs earnings more than doubling to $9.79 on sales of $11.5 billion, a 31.5% jump year over year.

Results: EPS of $18.60 on revenue of $17.7 billion. Investment banking revenue jumped 73% to $3.77 billion. Fixed income trading revenue climbed 31% to $3.89 billion, and equities trading revenue surged 68% to $3.69 billion. Asset management revenue shot up to $4.61 billion vs. a negative $96 million a year ago. Wealth management revenue grew 16% to $1.74 billion.

Provision for credit losses was a net benefit of $70 million, compared with net provisions of $937 million a year ago.

Stock: GS stock rose 1.5% to 332.65 early Wednesday. Goldman Sachs stock is in a three-weeks-tight pattern with a buy point of 342.98. It’s also finding support at the 10-week line.

Goldman Sachs reportedly plans to offer private wealth clients access to Bitcoin and other digital assets.

Wells Fargo

Estimates: Wells Fargo is seen posting EPS of 69 cents vs. 1 cent a year ago. But sales are expected to slip 0.6% to $17.62 billion.

Results: EPS of $1.05 on revenue of $18.06 billion. Provision for credit losses decreased $5.1 billion. Consumer banking revenue was flat at $8.65 billion. Commercial banking revenue fell 12% to $2.2 billion. Corporate and investment banking revenue grew 7% to $3.6 billion. Wealth management revenue rose 8% to $3.5 billion.

Stock: Wells Fargo stock fell 0.2% to 39.73. WFC stock is in a four-weeks-tight pattern with a buy point of 41.64. 

Bank of America (BAC) and Citigroup (C) report Thursday, while Morgan Stanley (MS) reports Friday.

Fed Not Expected To Raise Rates

As borrowing rates remain low and the economy bounces back, inflation fears have also grown, which is driving bond prices lower and yields higher. Higher bond yields benefit banks because they lend on the long end of the yield and borrow on the short end.

Meanwhile, Federal Reserve Chairman Jerome Powell has said it’s highly unlikely the Fed would raise rates this year. In a “60 Minutes” interview on Sunday, he said inflation would have to average around 2% before raising rates.

Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.


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