The first-quarter earnings season for 2023 is officially underway!

Per usual, the big banks kicked off the earnings announcement season, with Citigroup Inc. (C), JPMorgan Chase & Co. (JPM) and Wells Fargo & Company (WFC) reporting their first-quarter results Friday morning.

Wall Street was on pins and needles ahead of the big banks’ results. Remember, the banking sector has been all over the headlines for the last couple of weeks. Back in early March when Silicon Valley Bank crashed, there were fears of a banking contagion. And just when the markets began to settle, news of Credit Suisse Group AG (CS) having its own issues triggered another downward spiral in the market.

Now, as a numbers guy, earnings season is always my favorite time of year. It is the time when every company must open its books, reveal its quarterly numbers, and share how it expects to perform in the coming quarters.

So, you can bet I was curious as to how the big banks’ earnings would stack up, too.

Now, according to FactSet, the S&P 500 is expected to report a 6.8% decline in first-quarter earnings growth and 1.8% average revenue growth. The financial sector, on the other hand, is projected to post 9% revenue growth.

In today’s Market 360, we’ll review Citigroup’s, JPMorgan Chase’s and Wells Fargo & Company’s earnings results from yesterday morning. We’ll also consider the banks’ forward-looking guidance and loan loss reserves, as this is what’s most important to Wall Street. I’ll then share whether the big banks are good buys now.

JPMorgan Chase & Co.

For the first quarter, JPM Chase posted earnings of $4.10 per share, up 35.8% from earnings of $2.63 per share a year ago. Analysts were calling for earnings of $3.41 per share, so JPM posted a 16.8% earnings surprise. Revenue of $38.3 billion topped analysts’ estimates for revenue of $36.9 billion. This is up 19.8% from revenue of $30.7 billion reported in the same quarter of last year.

Now, while earnings and revenue are solid, it is important we also look at the loan loss reserves given the uncertain outlook for the economy. And JPM reported it built reserves by a net $1.1 billion, which is 18% more than the $902 million built in the same quarter the year prior.

Chairman and Chief Executive Officer Jaime Dimon also shared his thoughts on the U.S. economy:

The storm clouds that we have been monitoring for the past year remain on the horizon, and the banking industry turmoil adds to these risks … financial conditions will likely tighten as lenders become more conservative, and we do not know if this will slow consumer spending. We also continue to monitor for potentially higher inflation for longer (and thus higher interest rates), the inflationary impact of continued fiscal stimulus, the unprecedented quantitative tightening, and geopolitical tensions including relations with China and the unpredictable war in Ukraine.

Wells Fargo & Company

Wells Fargo posted strong earnings for its first quarter in fiscal year 2023. Earnings of $1.23 per share beat analyst estimates for earnings of $1.13 per share by 8.1%. Revenue increased 17% year-over-year to $20.7 billion, compared to analysts’ expectations of $20.08 billion in revenue. So, the bank posted a 2.9% surprise. Net income of $3.67 billion slipped nearly 21% year-over-year from net income of $4.63 billion in the same quarter of last year.

Wells Fargo also set aside $1.2 billion for credit losses, which includes “a $643 million increase in the allowance for credit losses reflecting an increase for commercial real estate loans, primarily office loans, as well as an increase for credit card and auto loans.”

Chief Executive Officer Charlie Scharf commented:

We are glad to have been in a strong position to help support the U.S. financial system during the recent events that impacted the banking industry… Looking ahead, we continue to move forward on our risk and control agenda, which is our top priority. While we have made progress, our work is not done, and we remain focused on completing the work in a timely fashion.

Citigroup Inc.

Citigroup beat analysts’ expectations on the top and bottom lines. For the first quarter, the bank reported earnings of $2.19 per share on revenue of $21.45 billion. This compares to earnings of $2.02 per share on revenue of $19.1 billion in the first quarter of 2022. The analyst community anticipated earnings of $1.65 per share on revenue of $19.99 billion, so Citigroup bested earnings estimates by 24.6% and revenue estimates by 6.5%.

Most important to note, however, is how Citigroup adjusted its loan losses. Citigroup reported approximately $17.2 billion at the end of the quarter, which is a 10.4% increase from $15.4 billion the same quarter a year ago.

Citigroup left its full-year 2023 revenue estimates unchanged. It expects revenue between $78 billion and $79 billion.

CEO Jane Fraser noted, “Our robust and well-managed balance sheet was a source of strength for our clients and we continue making progress in executing our strategy focused on our five core interconnected businesses while simplifying and transforming the firm.”

Are the Banks a Buy After Earnings?

In a word: No.

As my long-time readers know, I’m an ex-banking analyst who worked for a division of the government that is now a part of the Federal Reserve. This experience scarred me for life, and it’s why you’ll rarely, if ever, see a bank in my portfolios.

While the banks did post strong earnings, the inverted yield curve will remain a problem for them because it hurts their profitability. Instead, the best bet for your money remains in fundamentally superior stocks that have the staying power in any market environment and will not be negatively impacted by an inverted yield curve.

My Growth Investor Buy Lists are chock-full of fundamentally superior companies, which is why I am confident they will do well this earnings season.

So, if you want to invest in the crème de la crème, join me at Growth Investor today. Once you sign up, you’ll have full access to my latest Monthly Issues, Weekly Updates, Special Market Podcasts and much more!

Click here to learn more and become a Growth Investor member today.

Sincerely,

Louis Navellier

P.S. On August 19, 2022, the Fed released a 43-page report explaining how bad the economy really is. This report was not talked about during the press conference, but it suggests policymakers can’t do the jobs by themselves and actually could make matters worse.

The reality is the Fed popped another bubble. But this time not just in tech or real estate – but the entire stock market as a whole. That’s why I am urging you to get the details of this report and take action before it’s too late.

Click here for the shocking details.

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)