Earlier this week, a few companies such as Delta Air Lines and BlackRock reported earnings, but it is the releases from four major banks, JPMorgan Chase, Citigroup, Wells Fargo and PNC Financial Services, that really signal the awakening of the real economy.
The numbers are, so far, very good. JPMorgan crushed the figures, posting earnings per share of $3.79 in the fourth quarter, comfortably beating expected earnings per share of $2.62. The major ‘beat’ was powered by reversing previous credit loss charges to the tune of $1.9 billion, reversing previous charge-offs.
One downside: in the earnings report of JPMorgan that CEO Jamie Dimon mentioned was: “significant near-term economic uncertainty”.
The numbers for PNC are out, too, and tell a similar tale. The bank paid $3.26 per share, exceeding expectations of $2.61 per share, and also reversed some credit loss charges.
Citigroup said earnings for the three months ending in December were pegged at $2.09 per share, up 59.5% on an adjusted basis from the same period last year and firmly ahead of the Street consensus forecast of $1.31 per share.
Wells Fargo posted better-than-expected fourth-quarter earnings as well though revenue fall steeply as a drop in consumer and business lending was offset by home lending.
Giant earnings beats don’t mean bank stocks will rocket higher. Bank stock prices have not soared, on the contrary, they have gone down, but that doesn’t mean the earnings were disappointing. Both stocks had soared during the past three months.
The overall message from their earnings should provide investors with some comfort. Yes, some caution is required, but the economy is really getting better slowly even if it doesn’t always feel like it.
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