Jim Cramer explains why even strong bank earnings couldn't save their stocks
All six banks fell following their earnings reports, even as some delivered strong results, reflecting concerns about interest rates and the economic outlook.
Key points
- All six major bank stocks fell despite mixed third-quarter results.
- Cramer said investors are worried about inflation, rising rates and wobbly markets.
- Goldman, Citi and Morgan Stanley beat estimates but still saw shares drop.
The biggest U.S. banks reported mixed third-quarter results this week, but all six major bank stocks fell as investors focused on future risks rather than the numbers just reported. CNBC's Jim Cramer said on Wednesday that the negative reaction was unusual given the positives in many of the quarters.
Cramer, host of "Mad Money," pointed to persistent inflation, rising interest rates and newly wobbly capital markets as reasons for investor concern.
What Cramer said
Cramer said it was strange to see such universally negative reactions to quarters that contained plenty of positives. He added that this happens when investors are worried about the future, and it is hard not to worry given inflation, rising rates and shaky markets.
He also commented on individual banks. On Wells Fargo, he said CEO Charlie Scharf emphasized the bank is set up to do much better in a higher interest rate environment and that he believes him. On Citigroup, he said the stock was likely punished for its recent outperformance but called it a buying opportunity if you believe in the turnaround. On Goldman Sachs, he said the strong numbers and falling stock show many skeptics think the boom times are over, though he disagrees.
Frankly, it's strange to see such universally negative reactions to a set of quarters that contained plenty of positives.
— Jim Cramer
Bank-by-bank results
Wells Fargo beat earnings estimates but missed on revenue; its net interest margin stabilized at 2.43%, slightly ahead of expectations. JPMorgan Chase missed on both top and bottom lines due to weak fixed income trading and asset management, but management gave better-than-expected net interest income forecasts. Citigroup grew revenue 8% year over year, its best third quarter in a decade, and was the only major bank to exceed fixed-income trading revenue expectations.
Bank of America missed revenue and earnings expectations and faced a $1.2 billion regulatory penalty tied to alleged anti-money-laundering and sanctions violations; investment banking fees fell 11% and fixed-income trading revenue dropped 17%. Goldman Sachs beat estimates with investment banking fees up 21% and equities trading revenue up 72%. Morgan Stanley also topped expectations, with Institutional Securities Group revenue up 18% and wealth management revenue up 10%; CEO Ted Pick said he was cautiously optimistic about the fourth quarter.
