Alarm Signals in Bank Reports

by bitkogan

I continue to discuss banks, as nearly all the reports presented today have (surprisingly!) exceeded expectations. Here’s a brief overview of the numbers and what I’m paying attention to:

1️⃣ Bank of America (BAC)

— Revenue reached $26.3 billion, surpassing the forecast of $25.25 billion.

— Earnings per share (EPS) were $0.97, higher than the expected $0.81.

— The bank’s deposit volume decreased by almost 8% to $1.9 trillion, and the bank also lowered its forecast for interest income (income from deposits, loans issued, etc.).

2️⃣ Goldman Sachs (GS)

— Revenue totaled $12.2 billion, falling short of the $12.83 billion forecast.

— EPS was $8.79, exceeding the $8.24 expectation.

— Revenue decreased by 5% year-over-year, and EPS dropped by 18.3%.

— In the future, the bank may increase income due to the newly announced Apple Savings Account, which will generates 4.15% annual interest.

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3️⃣ Bank of NY Mellon (BK)

— One of the oldest banks in the US reported revenue of $4.4 billion and an EPS of $1.12, in line with market expectations.

— Revenue increased by 11% year-over-year (partly due to a 52% rise in net interest income), and EPS grew by 30%.

— However, the volume of assets under management declined by 16% to $1.9 trillion due to market influence (i.e., client asset withdrawal).

Still, the reports are far from ideal news, and the market seems to agree:

  • Bank of America was up 2% in pre-market but has since lost around about 0.7% from yesterday’s close
  • Goldman Sachs is down approximately 1.5%
  • Bank of NY Mellon has reduced losses and now sees a 0.25% increase
  • S&P 500 index futures are hovering around the zero mark, while gold has risen, adding 0.7%

However, the market is currently highly volatile, and so the picture may change by the close of trading.

Conclusion:

As I mentioned earlier, credit institutions are unanimously stating that they’re cutting costs and increasing return on capital. Simultaneously, the banking crisis that began with the Silicon Valley Bank story is already causing deposit outflows and other challenges. As a result, banks need to increase loan reserves. Therefore, I prefer to stay away from bank stocks for now.

I might consider taking partial profits in the SPDR S&P Bank ETF (KBE US) today. In the current situation, it’s better to secure a small profit from the transaction than to wait and see where things end up.

And of course, there are several intriguing ideas that I’ll lay out in much more detail very, very soon.

Disclaimer: This information is only for educational purposes. Do not make any investment decisions based on the information in this article. Do you own due diligence or consult your financial professional before making any investment decision.

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