Topline
A quartet of large American banks smashed expectations in their quarterly earnings reports Friday, sending their respective stocks surging as investors regain confidence in the industry marred by regional bank struggles last month.
Bank bulls had plenty of reasons to be happy Friday.
Key Facts
JPMorgan, Citigroup, Wells Fargo and PNC – the first, third, fourth and sixth largest U.S. banks by assets—disclosed their latest financial data Friday morning, handily beating consensus profit estimates, and all but PNC beating revenue forecasts.
Their stocks largely rose in early trading, with JPMorgan’s 7% gain leading the way, while shares of Citi and Wells Fargo popped 4% and 1%, respectively, while PNC slipped 2%.
Friday’s rally caps a rapid recovery for bank stocks after the sector reeled as regional banks Silicon Valley Bank and Signature Bank failed and other firms struggled last month.
The 10 largest banks have now gained $94 billion in market capitalization over the last three weeks, as of 9:45 a.m. ET, recovering much of the $291 billion the grouping lost between March 1 and March 24.
Key Background
Friday kicked off a particularly pivotal earnings season for banks after March featured the second and third-largest bank failures in the nation’s history. Also impacting the sector was another increase to the federal funds rate, set by the Federal Reserve and determining overnight borrowing costs between banks. The Fed now projects the U.S. will fall into a recession later this year.
Tangent
Retail sales fell 1% in March, according to Commerce Department data released Friday, with consumers notably reining in spending on cars—a sign Americans may be scaling back on more expensive purchases due to elevated borrowing costs. In a statement included alongside earnings, JPMorgan CEO Jamie Dimon said the macroeconomic “storm clouds” partially fueled by the banking crisis threaten the resilience of consumers, which would surely be a bad sign for banks’ financial health if loans shrink.
Crucial Quote
“This whole banking thing was bad for banks,” Dimon said during JPMorgan’s earnings call about the extreme stress on the entire U.S. financial system as regional banks flailed. “We want healthy community banks, we want healthy regional banks,” Dimon continued.
Further Reading
JPMorgan Sales Hit Record $38.3 Billion—Stock Soars After Earnings Shatter Expectations (Forbes)
March Sadness: Banks Lost More Than $300 Billion In Market Cap This Month (Forbes)
Source: https://www.forbes.com/sites/dereksaul/2023/04/14/big-bank-earnings-defy-recession-fears-fuel-nearly-100-billion-stock-rally-as-jpmorgan-citi-and-wells-fargo-profits-soar/