CNBC’s Jim Cramer offered investors his take on Friday on the major banks that reported gains this week.
“If the whole market wasn’t already roaring yesterday, I think we could have had a nice rally in response to these numbers. But as it is now, I’d say this is a surprisingly solid start to the earnings season,” he said. said.
JPMorgan Chase, Morgan Stanley, Wells Fargo and Citigroup announced their latest quarterly results on Friday. Here’s Cramer’s take on each of the banks’ latest quarters:
JPMorgan Chase beat Wall Street expectations for its top and bottom lines, helped by the Federal Reserve’s rate hikes. Cramer said he was surprised the bank had a solid quarter since CEO Jamie Dimon warned the US economy was likely to plunge into recession by mid-next year.
However, Cramer said he still expected the bank to see a boost from rising interest rates.
“The banks make a fortune when the Federal Reserve raises interest rates because they can take your deposits, for which they pay next to nothing, and then invest them in short-term treasuries to get a much higher risk-free return,” he said. explained.
The bank beat profits and earnings in the last quarter, but saw a decline in profits as a result of its decision to increase its loan loss reserves.
Cramer said he likes the stock because the company has more interest rate exposure than most of its competitors, making it attractive in a high-interest rate environment. And while a risk of higher rates is that people could lose their jobs and default on their obligations, which would result in a higher rate of bad loans, Wells Fargo’s strength in its net interest income is more than enough to offset the damage from bad loans, according to Cramer.
“I remain a believer here – management is performing incredibly well – I think the story will only get better as the rates go up,” he said. “Buy Wells Fargo.”
Cramer said he believes the market has overreacted to Morgan Stanley’s third-quarter results and lost sales. Shares of the bank fell 5%.
While acknowledging the quarter was tough, Cramer insisted he believes the stock is a buy, emphasizing the generous dividend and share buybacks.
“I think Morgan Stanley can eventually thrive if the markets level, but until then you have to be patient in this one,” he said.
Cramer said he would rather own the other banks than Citi, which outperformed sales and profits in the last quarter but saw profits fall by 25%. The company’s shares rose 0.65%.
“We’ve seen Citi rise a number of times in response to earnings… And you know what happened? Earnings faded quickly and the stock fell right away,” he said.
Disclaimer: Cramer’s Charitable Trust owns shares of Morgan Stanley and Wells Fargo.
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