Bank Earnings Show Consumer Is Strong, Even if Corporate Sentiment Isn't

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October 15, 2019

The third-quarter earnings season kicked off in earnest Tuesday morning, with banks leading the way. JPMorgan Chase ($JPM), Goldman Sachs ($GS), Citigroup ($C), and Wells Fargo ($WFC) all reported their quarterly numbers before the bell. JPMorgan was the only all-around beat, though Citi posted strong revenue numbers, Wells came in mixed, and Goldman missing estimates entirely.

Goldman's miss is at least partially in response to the cooling IPO market, said Jeff Weiner, chairman and CEO of Marcum LLP. That bank, along with Morgan Stanley, is more dependent on IPO fees than firms with large retail banking arms, like Citi, Wells, and JPM.

Banks also suffer in times of low interest rates, which help the consumer but ding margins for lenders.

Weiner said he expects a "mixed bag" this earnings season, not just in the banking sector. The sheer amount of news headlines and policy changes coming out of the Trump White House, mixed with geopolitical unrest and prolonged trade tensions, has created a climate of "wait and see" when it comes to capital expenditures, hiring, and expansion, he said. "When things are as volatile as they have been ... we just don't know where the next conflict or problem is going to be."

He noted that the last time he came on Cheddar, back in July, the Dow was trading at just about the same level as it was on Tuesday. But it's had big swings in between. "I don't know that the market is going to go out of the trading range we've been in," Weiner said. "I almost think we're in a presidential Twitter market," where investors are just reacting to the news out of the White House rather than the underlying macroeconomic factors that have driven the last decade's expansion.

JPMorgan CEO Jamie Dimon alluded to that in his conference call following the bank's strong earnings Tuesday morning, saying that consumer spending remains strong even while the trade war has clearly made an impact on business sentiment. JPMorgan reported profits of $9.1 billion on $29.3 billion in revenue for the quarter.

Those results aside, Weiner was not optimistic that many large U.S. firms were going to post blowout numbers for the time being. "None of this is good for the economy," he said of the Trump administration's policy agenda. "It's just not a good business climate for people to want to take risk."

The wave of bank earnings continues Wednesday, with Bank of America reporting before the bell, followed by Morgan Stanley on Thursday.