I just read up on the latest earnings reports from some of the big players — JPMorgan Chase, Wells Fargo, and BlackRock. And let me tell you, it’s a mixed bag of information. On one hand, these banks are crushing it. On the other hand, there are some serious red flags waving in the wind.
The Big Three and Their Numbers
First off, let’s get into the numbers. JPMorgan is basically the canary in the coal mine since it's such a massive entity. They reported a slight dip in net income — down to $12.9 billion from $13.2 billion last year — but their revenue? That shot up to $43.3 billion! They even more than doubled their bad loan coverage! If that’s not a sign they’re expecting some pain down the road, I don’t know what is.
Then there's Wells Fargo. They’re in a bit of a tougher spot with net income down 11% to $5.1 billion and total revenue dropping 5%. But here’s the kicker: they beat earnings per share estimates by almost 20%! Their stock jumped up after that news. It makes you wonder if everyone is just fine with being mediocre as long as you look good on paper.
And BlackRock? Well, they’re just swimming in assets with over $11 trillion under management! But again, like JPMorgan, they increased their bad loan coverage too.
The Economic Context
Now let’s zoom out for a second and look at the economic landscape these banks are operating in. There’s this whole narrative going around that we might have been in recession since 2022! And apparently inflation has been understated by about 15% since 2019 according to some economists. So basically all those numbers we’ve been looking at might be off!
It makes sense why these banks would want to prepare for something worse than what people think is happening right now.
So Are We Headed For Trouble?
Here’s my takeaway: These institutions are not as healthy as people think or at least they’re preparing for something that could be really bad down the line.
The S&P Banks Index has returned only about 14% this year compared to an almost 22% return for S&P overall! That alone should raise some eyebrows.
And if you look closely at their reports... it's almost like they're saying "We're fine... for now."
What do you guys think? Are these just normal cycles or are we on the brink of something bigger?
