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Did Big Bank Earnings Just Signal ‘Real’ Economic Recovery?

Did Big Bank Earnings Just Signal ‘Real’ Economic Recovery?

The Dow was up nearly 300 points early Friday on big bank earnings across the board that indicates to investors a truly recovering economy. 

Earlier this week we saw JPMorgan Chase come out with earnings that beat analyst estimates, but it wasn’t until the end of this week when a lineup of banks followed suit that the market responded with a resounding … yes!

Goldman Sachs reported Q3 results on Friday that absolutely blew past estimates, with revenue up 90% at $13.61 billion, compared to expectations of $11.68 billion. 

Goldman’s Q3 earnings per share came in at $14.93, while expectations were for $10.18. The bank saw profits rise by 63% to hit nearly $5.3 billion. 

While stellar earnings for JPMorgan earlier this week saw its share price lose 2% right after the report, Goldman’s share price responded appropriately, up 2.35% today: 

On Thursday, Morgan Stanley also beat expectations with earnings at $1.98 per share (against estimates of $1.68 per share), and revenue and net income up 25% from a year ago. The bank also noted “record net new assets of $135 billion in wealth management”. 

Bank of America, on the other hand, pulled out all the stops by soundly beating expectations for net interest income. BofA’s interest revenue hit $11.2 billion, up 9% from the same quarter last year. The consensus was for Q3 interest revenue of $10.7 billion. As Bloomberg puts it, the big story here is “what the banks are doing with the billions of dollars of excess cash” consumers are putting in their accounts. And BofA did it best.

CitiGroup’s profits surged 48%, with Q3 earnings showing $2.15 per share on $17.15 billion in revenue. Again, the bank beat expectations. 

What does it all mean? The market seems to think it means the economic recovery is … real. It means the banks are releasing tons of money that had been stockpiled for a rainy day to cover what was expected to be a collection of bad loans due to the pandemic. 

Even the disastrous supply chain issues that have the retail industry fretting over the holiday shopping season doesn’t seem to be bothering the banks. 

"I doubt we'll be talking about supply chain stuff in a year. I just think that we're focusing on it too much," CNN quoted JPMorgan Chase CEO Jamie Dimon as saying. "It's simply dampening a fairly good economy. It's not reversing a fairly good economy."

The big banks have spoken, through their earnings, and Wall Street sees the trillions of dollars of money they’re moving around as a clear signal that we’ve crossed the pandemic threshold, with or without inflation or supply chain concerns. 

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