First quarter earnings season kicked off last week with reports from some of the largest names in finance with investors watching closely for any potential inklings of an economic downturn.
JPMorgan Chase, Citigroup and Wells Fargo, as well as PNC and BlackRock, all published their reports on Friday — giving the public some insight into how they fared through the first three months of the year, which included the collapse of Silicon Valley Bank and Signature Bank.
And it appears as though they largely made it out unscathed. The largest banks benefitted from the same heightened interest rates that tipped those regional banks over the edge, sending depositors fleeing to safer names.
All beat estimates: PNC and Wells Fargo by about 9%, Citi by around 13% and JPMorgan by nearly 21%.
Still, the market reaction wasn't equal. JPMorgan shares surged 7.5% on Friday — the stock's largest one-day rally since November 2020. Citigroup shares advanced 4.8% while Wells Fargo closed the day down 0.1%. PNC stock also felt the pressure.
Before the Bell spoke with Steve Sosnick, chief strategist at Interactive Brokers, to discuss Friday's big bank earnings and explain that stock discrepancy.
This interview has been edited for length and clarity.
Before the Bell: What are your takeaways from Friday's earnings reports?
Steve Sosnick: It's JPMorgan and the other guys — Jamie Dimon is Bruce Springsteen and everyone else is the E Street Band. The market loved the first quarter results, the bank is firing on all cylinders and they're clearly benefiting from the recent tremors in the banking industry.
Wells Fargo appeared to have a good, solid quarter but their stock was essentially unchanged on Friday. Citigroup which should have benefitted from the same trends, had a nice day. PNC, which is one of those super-regional banks that we need to pay a little more attention to, saw its stock fall. But JPMorgan was off to the races.
I've always complained about banks reporting their quarterly earnings first because they're extraordinarily idiosyncratic. No other company is really dependent upon trading results or investment banking for their bottom line. They're far more interest rate sensitive and certainly more yield curve sensitive than essentially any other industry. I've never liked the fact that they lead off because I think people extrapolate from them. But I think you're extrapolating from a strange subset.
Why did JPMorgan stock outperform its competitors?
They all beat estimates, but shares of JPMorgan surged way beyond the competition.
They have good management. Jamie Dimon has become the face of the industry and his team benefits because of that — there are certain advantages to being the market leader. People who pulled their money from regional banks looking for safety disproportionately sent it to JPMorgan.
There are concerns about the health of commercial real estate. What did you hear?
This was another situation where CEOs were careful not to amplify fears. I do think there was a lot of caution given. But I think the real action comes this week, because we're going to hear from pure banks.
We're going to hear to what extent money might have flowed out of some of these banks and into the cohort we heard from on Friday. A lot of smaller and midsize banks do more construction lending.
We didn't learn a ton about CRE today. Ultimately we need to talk about it, but maybe in the short term it's better to say less.
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