TLDR:
Investors had to look past billions of dollars in special payments to replenish the government’s deposit backstop after the fallout from last year’s Silicon Valley Bank failure. Management teams were also trying to forecast the moving target of how many Federal Reserve interest rate cuts to expect this year.
Key Points:
- Morgan Stanley’s investment banking operation reported a fourth-quarter that exceeded estimates on adjusted earnings-per-share (EPS) of $1.13. The bank’s revenue of $12.9 billion for the final three months of 2023 was down 10% from the year-ago period but beat expectations.
- Wells Fargo reported better-than-anticipated quarterly earnings and revenue, with adjusted EPS of $1.29 and revenue of $20.48 billion. The bank’s stock dropped initially due to concerns about net interest income (NII) for 2024 potentially coming in lower year over year.
- Goldman Sachs reported strong performance in its Asset and Wealth Management segment, with revenue surging 23% year-over-year to $4.39 billion. The bank’s Investment Banking segment underperformed.
- JPMorgan Chase reported quarterly revenue of $39.94 billion, beating expectations. CEO Jamie Dimon said 2023 was solid, and the bank forecast full-year 2024 NII at $90 billion, around the same level as 2023.
Jim Cramer’s Charitable Trust is long on Wells Fargo and Morgan Stanley. Cramer believes Morgan Stanley’s conservative macro outlook and caution around its Wealth Management segment could be an under-promise, over-deliver strategy. The club sees strong prospects in Morgan Stanley’s Investment Banking segment and believes that capital markets will recover with lower Fed policy rates.
Despite concerns about net interest income, the club remains positive on Wells Fargo as a multiyear recovery play. Once financial regulators lift the firm’s asset cap, Wells Fargo will be able to expand its balance sheet and potentially generate more profits.
The club also considered switching from Morgan Stanley to Goldman Sachs after the earnings releases. Goldman Sachs is seen as a cleaner investment banking recovery play, but for now, the club is sticking with Morgan Stanley due to its strong prospects in the Investment Banking segment.
Overall, the article highlights the mixed performance of Morgan Stanley, Wells Fargo, and other major banks during the earnings season. The banks faced challenges such as special payments and uncertainties around Federal Reserve interest rate cuts. However, there is optimism about the long-term prospects of these banks, particularly in their investment banking operations.
