Another Mixed Quarter for the Big Banks

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Another Mixed Quarter for the Big Banks

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The third-quarter earnings season is officially underway, and yesterday we heard from JPMorgan Chase & Co. (NYSE:JPM), Wells Fargo & Company (NYSE:WFC), Citigroup Inc. (NYSE:C) and Morgan Stanley (NYSE:MS).

Now, longtime readers know that while I do look forward to every new earnings season, they also know that I’m not a big fan of the “big banks”

I used to work for a division of the government that is now part of the Federal Reserve. During my time there, I saw how they essentially “cook their books” – and that scarred me for life.

Putting that aside, the reality is that since the start of the year, these big banks have been on the decline.

JPMorgan and Citigroup, down 35% and 33%, respectively, are both underperforming the S&P 500, which is down 24% this year.

This performance could get worse, as according to FactSet, the Financial sector will likely see the second largest year-over-year earnings drop of the 11 sectors in the S&P 500, with earnings expected to decline 13.5%. Within the Financial sector, the banking industry is predicted to report a year-over-year earnings decline of 13%.

The cause?

The Fed’s key interest rate hikes.

Last month, the Fed unanimously voted to raise key interest rates by 75 basis points for the third-straight time last month. And rising rates means that banks can charge consumers more for borrowing money. Although this sounds like it would be good news for banks, when it becomes more expensive for consumers to borrow, demand for loans slow – which, in turn, can hurt earnings.

So, let’s use today’s Market360 to see how well these four banks fared…

JPMorgan released mixed earnings the third quarter in fiscal year 2022. Analysts expected earnings of $2.90 per share on revenue of $32.13 billion. The company announced earnings of $3.12 per share, so JPMorgan topped analysts’ expectations by 7.6%. However, this is a 16.6% drop from earnings of $3.74 a year ago. Revenue came in at $32.7 billion, up 10.3% from $11.7 billion in the same quarter last year.

Wells Fargo reported third-quarter earnings of $0.85 per share, down 44% year-over-year from earnings of $1.17. Revenue came in at $19.5 billion, topping analysts’ estimates of $18.77 billion, and up 4% from revenue of $18.83 billion a year ago.

For the third quarter, Citigroup posted earnings of $1.63 per share on revenue of $18.51 billion, beating analysts’ earnings expectations of $1.44 per share and revenue of $18.27 billion. While the earnings fell 24% year-over-year from earnings per share of $2.15, revenue increased 7% year-over-year from revenue of $17.2 billion.

Morgan Stanley announced third-quarter earnings of $1.47 a share, a 26% fall from earnings of $1.98 per share in the same quarter last year. Revenue dropped to $12.99 billion, a 14% decrease from $14.75 billion a year ago. Analysts expected earnings of $1.52 per share and revenue of $13.27 billion, so the company missed on the top and bottom lines.

While JPM, C and WFC shares did rally on their mixed results (MS shares fell more than 4%), they still aren’t good buys. Here’s how they stack up in Portfolio Grader:

As you can see, Morgan Stanley and Wells Fargo have C-ratings, meaning that they are “Holds.” And Citigroup and JPMorgan have D-ratings, meaning that they are “Sells.”

The bottom line, folks, is that Big Banks are a lousy investment.

So, rather than invest in the financials right now, I recommend “inflation proofing” your portfolio by adding fundamentally superior stocks that are profiting from rising energy prices and higher interest rates.

In Growth Investor, we’ve already taken steps to align our Buy Lists to profit in this environment.

So, if you want to prosper in the current environment, stay away of the Big Banks and invest in fundamentally superior high-growth companies instead. If you’re not sure where to start, join me at Growth Investor today and you’ll have full access to my latest buys, Top Stocks lists, as well as my High-Growth Investment and Elite Dividend Payers Buy Lists.

I am confident that these are the stocks that will emerge as the market leaders deliver strong profits to investors.

Click here to get started today.

Source: InvestorPlace unless otherwise noted

 

 

Louis Navellier

P.S. There is a great divide opening up in America – and investing in my Growth Investor stocks will help get you on the right side of it. On one side is a new aristocracy that’s amassing more wealth more quickly than any other group in American history. For people like me, the one percent, life has never been better, more prosperous.

On the other side, the opposite is happening. Wealth is flowing out of the pockets of ordinary Americans at an unprecedented rate.

What’s happening is only going to gather in strength over the coming decades. It certainly won’t weaken.

Few Americans even know that any of this is going on. I’ve never seen anyone from my side of the chasm step forward to explain any of these things.

It’s why I put together this video. In it, I’ll lay out exactly what is happening, including several key steps every American should take right now.

The Editor hereby discloses that as of the date of this email, the Editor, directly or indirectly, owns the following securities that are the subject of the commentary, analysis, opinions, advice, or recommendations in, or which are otherwise mentioned in, the essay set forth below:

JPMorgan Chase & Co. (JPM)


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