Big banks’ profits have plummeted and the results have been positive enough to allay a concern about their ratings, CNBC’s Jim Cramer said Thursday.
Cramer, himself an alum of Goldman SachsInvestment Shop said their quarterly numbers should be strong enough to support their current valuations.
“We need to worry less now that earnings season begins. The banks are doing pretty damn well, even if their stocks don’t necessarily reflect that fact.”Bad money“Host said.
JP Morgan, Goldman and Wells Fargo all released results on Wednesday, followed by the next day Citigroup and Bank of America. Though every company experienced top and bottom line beats in the first quarter of this year, stock deals diverged as its reports went.
After reviewing the reports, Cramer doubled his conviction that it pays to lag behind the banks.
“I’m still optimistic about the finances, especially the investment banks like Goldman Slacks and the turnaround games like Wells Fargo,” he said. “According to these numbers, the banks have become dirt cheap. Believe me, they won’t stay that way.”
Below is a summary of Cramer’s response to earnings reports from the five financial giants:
- Merits:: $ 18.60 per share versus $ 10.22 per share expected by analysts surveyed by Refinitiv.
- Revenue: Expected $ 17.7 billion versus $ 12.6 billion.
“The numbers were so strong that I’m bringing the old ones back [nickname] … I call them ‘Golden Slacks’, “said Cramer.” If it traded at 10x earnings it would be a share of $ 413 in stock. “
- Merits:: $ 4.59 per share versus $ 3.10 per share expected by analysts surveyed by Refinitiv.
- Revenue: $ 33.12 billion versus $ 30.52 billion that is expected.
“For me, this was the second best report yesterday, although the market didn’t seem to agree when investors sold the news. But make no mistake, the numbers were fantastic,” he said. “I think the JP Morgan stock pull-out is purely and simply an opportunity to buy, and clearly someone will agree because the stock started rallying again today.”
- Merits:: According to Refinitiv, earnings per share are $ 1.05 versus 70 cents per share.
- Revenue: $ 18.06 billion versus $ 17.5 billion that is expected.
“Wells Fargo yelled yesterday because this is more of a turnaround story than a banking story, which is why we actually own it for my charitable trust,” said Cramer. “I keep telling you it’s a better buy than JP Morgan because expectations are much lower for Wells, and yesterday they absolutely exceeded that low bar.”
- Merits: $ 3.62 per share versus $ 2.60 per share expected according to Refinitiv.
- revenue: $ 19.3 billion versus $ 18.8 billion expected
“Just like the banks that reported yesterday, Citi has a lot of strength on the investment banking side, but traditional consumer banking has been a lot less impressive,” he said. “If I had to rank this quarter, guess what, I’d put it right below JP Morgan’s.”
- Merits:: 86 cents per share compared to 66 cents per share expected by analysts surveyed by Refinitiv.
- Revenue: $ 22.9 billion versus $ 22.1 billion that is expected.
“It got the worst reaction from the market. I’ll say the market is wrong. It’s down almost 3% today. I thought it was offensive,” said Cramer. “There was nothing particularly surprising in the quarter itself. Don’t despair. If we get a few rate hikes, this is the one we need to own and we will get it eventually.”
Disclosure: Cramer’s charitable foundation owns shares in Wells Fargo.