Big bank profits are coming out and the results are positive enough to allay a concern about their valuations, CNBC’s Jim Kramer said on Thursday.
Shares of major financial institutions such as JPMorgan Chase and Wells Fargo have risen since last summer, well outpacing the market.
Kramer, himself a graduate of the Goldman Sachs investment store, said their quarterly numbers should be strong enough to support their current valuations.
“We have one thing to worry about now that the earnings season has begun to roll. Banks are doing pretty well, even if their shares don̵
JP Morgan, Goldman and Wells Fargo released results on Wednesday, followed by Citigroup and Bank of America the next day. Although each company showed the first and lowest level in the first quarter of this year, their stock trading diverged after their reports.
After reviewing the reports, Cramer doubled his belief that banks were worth falling behind.
“I’m still attached to finance, especially to investment banks like Goldman Slacks, and the turnaround is like Wells Fargo,” he said. “After those numbers, banks became cheap. Believe me, they won’t stay that way.”
The following is an overview of Cramer’s response to the revenue reports from the five financial giants:
- Income: $ 18.60 per share against $ 10.22 per share expected by analysts polled by Refinitiv.
- Income: $ 17.7 billion versus the expected $ 12.6 billion.
“The numbers were so strong that I return the old one [nickname] … I call them “Golden Frosts,” Cramer said. “If it was trading at 10x, it would be a $ 413 share … I bet that’s the place, especially now that Goldman has the right to buy back cash.”
- Income: $ 4.59 per share against $ 3.10 per share expected by analysts polled by Refinitiv.
- Income: $ 33.12 billion versus the expected $ 30.52 billion.
“For me, this was the second best report yesterday, although the market didn’t seem to agree as investors sold the news. But make no mistake, the numbers were fantastic,” he said. “I think the transfer of JP Morgan’s shares is an opportunity to buy, clear and simple, and obviously someone agrees, as the shares started to recover today.”
- Income: $ 1.05 earnings per share against 70 cents per share expected, according to Refinitiv.
- Income: $ 18.06 billion versus the expected $ 17.5 billion.
“Wells Fargo roared yesterday because it is seen as a reverse story rather than a bank story, which is why we actually have it for my charitable trust,” Kramer said. “I keep telling you that this is a better purchase than JP Morgan, because expectations are much lower for Wales, and yesterday they absolutely cleared that low band.”
- Income: $ 3.62 per share, against $ 2.60 per share, expected, according to Refinitiv.
- Income: $ 19.3 billion, compared to the expected $ 18.8 billion
“Just like the banks that reported yesterday, Citi has gained a lot of power from investment banking, but traditional consumer banking has been much less impressive,” he said. “If I had to rank this quarter, you know what, I’d put it just below that of JP Morgan.”
Bank of America
- Income: 86 cents per share, against 66 cents per share expected by analysts surveyed by Refinitiv.
- Income: $ 22.9 billion, compared to the expected $ 22.1 billion.
“He got the worst reaction from the market. I will say that the market is wrong. Today it collapsed by almost 3%. I thought it was insulting,” Kramer said. “There was nothing particularly surprising in the quarter itself. Don’t despair. If we have a few interest rate hikes, that’s what you’re going to own and we’ll get them in the end.”
Disclosure: Cramer’s charity trust owns shares in Wells Fargo.
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