The U.S. corporate earnings reporting season got off to a good start this week with large U.S. banks reporting robust first quarterly performance despite the collapse of Silicon Valley Bank and Signature Bank last month, but regional banks could still provoke some market volatility given their capital and liquidity issues when they report in coming weeks.
JPMorgan shares ended 7.6% higher on Friday after the U.S. largest bank by assets, said its first-quarter profit rose to $12.62 billion, or $4.10 a share, from $8.28 billion, or $2.63 a share, in the year-ago quarter. Meanwhile, the chief executive officer of the bank said the economy still remains resilient.
“My biggest takeaway is the ‘goliath’ keeps winning and megabanks have benefited mightily from this recent banking ‘crisis.’ The net interest margin or the net interest income for both Wells Fargo and JPMorgan is up significantly,” said Milind Mehere, chief executive officer and co-founder of Yieldstreet.
“Both Wells Fargo and JPMorgan delivered very, very solid results, blowing past the expected earnings,” Marenzi said. “Because a lot of small and medium businesses rely on regional banks and community banks for their financing needs, any tightening that happens [to smaller banks] is going to impact them because they’re gonna have to go to higher cost options, or have to start cutting costs. And both of those scenarios are not good for the economy, and could potentially be a catalyst for the recession,” Mehere said.
Put in year to date performance terms, the S&P 500 index has advanced 7.3%, while the regional banking ETF is down 26.9%. “The damage done to this group by the March swoon has not started to reverse, even by a little bit,” wrote Colas, in a Thursday note.
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