$JPM Delivered - Bank's Are Cheap

Macro Perspectives: Thu 14 Oct 21

As expected JP Morgan crushed earnings expectations. The biggest bank in the U.S. has now beat on earnings and revenues for six consecutive quarters, since the depths of the pandemic economy.

We’ve talked about the war chest of loan loss reserves the banks are sitting on, all at their disposal to turn into net income at their discretion. JP Morgan moved another $2.1 billion to the bottom line for Q3, with another $6 billion remaining, to move to the bottom line, before these "loan loss allowances" return to pre-pandemic levels (of Q4 2019).

With that pre-pandemic comparison in mind, JP Morgan has now generated $50 billion in net income over the past four quarters - $14 billion more (about 38% higher) than the record level profits of 2019.

So, business continues to boom at JPM (and for bank’s overall); deposits are up 20% compared to the record levels of last year, investment assets are up 29%, investment banking fees are up 60% and wealth management assets are up 17%.

This is all thanks, in large part, to this chart (a deluge of new money), and a Fed that has been the backstop for risk taking for the past nineteen months.

Bottom line: The banks are profit printing machines, and will be for the foreseeable future. And bank stocks are cheap.