Big Bank Earnings From Goldman, Bank of America, and More

Market Rebellion

This article was last updated on 07/18/2022.

bank earnings

Monday Morning Rebel Brief

Good morning Rebels! Stocks are trading higher this morning on the back of successful big bank earnings and a surging crypto market! Despite President Joe Biden’s economic approval ratings sinking to lows not seen in 14 years, banks have been happy to point out that the consumer remains strong. Let’s get into it.

Earnings results in a nutshell

Four banks beat expectations, some by more than others, assisted by rising interest rates and fixed income investing.

Goldman Sachs (GS): Top and Bottom Line Beat

  • Beat EPS expectations, reporting $7.73 vs an expected $6.58

  • Beat revenue expectations, reporting $11.86B vs an expected $10.86B

  • The stock is trading at $304.50 per share, +3.62% in the premarket

Though Q2 EPS fell quarter-over-quarter based on macro declines in investment banking, this was priced into the profit expectation, which GS handily exceeded. Goldman attributed the revenue beat to a 55% increase in fixed income operations — including trading of currencies, commodities, and rates — which earned $3.61B.

Synchrony Financial (SYF): Top and Bottom Line Beat

  • Beat EPS expectations, reporting $1.60 vs an expected $1.47

  • Beat revenue expectations, reporting $4.07B vs an expected $3.69B

  • The stock is trading at $31.39 per share, +6.08% in the premarket

The Synchrony CEO cited loan growth and strengthening credit trends, and said that the consumer is strong. Though Synchrony is only a mid-sized bank, this rhetoric will likely go a long way in the recessionary debate that’s currently raging across the market.

Unusual Options Activity

Charles Schwab (SCHW): Top and Bottom Line Beat

  • Beat EPS expectations, reporting $0.97 vs an expected $0.91

  • Beat revenue expectations, reporting $5.09B vs an expected $5.04B

  • The stock is trading at $64.54 per share, +3.80% in the premarket

Charles Schwab Corp reached a new quarterly net income high of $1.8B GAAP, $2.0B adjusted, citing a “sustained client focus” model.

CEO Walt Bettinger said that “Clients remained engaged during the second quarter even as pressures mounted on the U.S. economy, including rising inflation and the Fed’s corresponding shift to an aggressive tightening stance […] These pressures have all contributed to an environment that highlights the importance of our contemporary approach to full-service investing.

Bank of America (BAC): Slim Top and Bottom Line Beat

  • Beat EPS expectations, reporting an adjusted $0.78 vs an expected $0.75

  • Beat revenue expectations, reporting $22.79B vs an expected $22.67B

  • The stock is trading at $32.15 per share, -0.31% in the premarket

Bank of America collected more revenue than Goldman Sachs, Schwab, and Synchrony Financial combined this quarter — yet their earnings-per-share is the weakest of the four. This is due in part to a $523 million dollar provision for credit losses.

On the other hand, CEO Brian Moynihan echoed the sentiment of Goldman Sachs, attributing heightened revenue to a a surge in net interest income (+22%) on the back of rising interest rates and overall loan growth.

Biden’s Low Economic Approval Ratings

President Joe Biden’s economic approval ratings have sunk to the lowest levels of his presidency — 30%. This is considerably lower than both President Barrack Obama and President Donald Trump’s ratings. It makes sense — 4 out of 10 Americans are being forced to cut back spending on necessities like groceries amidst the current inflation. In a related story: 86% of Democrats say Biden’s rhetoric on inflation has been “ineffective”, as well as 93% of Republicans.

Crypto Names Surge

Bitcoin surged this weekend, surpassing $22,000 — a level it has contended with for over a month now. Along with it, names in the crypto space are surging. Ethereum is higher by more than 10% in the past 24 hours, briefly surpassing the $1,500 level at 6:30AM EST. Altcoins like Doge (+5%), Solana (+7.15%), XRP (+4.86%) and Binance Coin (+4.44%) are coming along for the ride.

The positivity is contagious:

  • Coinbase (COIN) shares are up nearly 6% this morning
  • Microstrategy (MSTR) shares are up more than 7% this morning
  • Riot Blockchain (RIOT) shares are up more than 7% this morning
  • Marathon Digital (MARA) shares are up more than 8% this morning.

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