The big banks are at it again. They’ve kicked off earnings season with what appears to be a bang – record highs and substantial profit increases across the board. But is this stellar performance too good to be true?
That’s the question I aim to answer in my latest “Buy This, Not That” video. I dive deep into the earnings reports of six of the biggest U.S. banks to uncover what’s really driving their numbers. And let me tell you, there’s more than meets the eye.
As Shah Gilani points out, while the headline numbers are undoubtedly impressive, there are some concerning trends lurking beneath the surface. JPMorgan Chase, for example, saw a 25% year-over-year increase in profits. But as Gilani notes, “the bulk of that, of those new revenues, of that 25% increase in profits, came from a one-time $7.9 billion gain from a swap of Visa stock.”
One-time gains are just that – one-time. They’re not sustainable, and they don’t reflect the underlying health of the business. In fact, when you strip out JPMorgan’s one-time gain, their profits were actually down compared to a year ago. As Gilani puts it, “I’m unimpressed. Yes, I like the fact that they had a surge in investment banking fees. But here’s the cool thing to know when you look in between the numbers, when you read between the lines, great numbers. Nice beautiful day today. Nice new high for JPM. Except, when you take out the one-time gain this quarter, the profits were actually down to $4.40 a share, versus a year ago when they made $4.75 a share.”
This trend of unsustainable gains and concerning underlying metrics plays out across the other big banks as well. Bank of America beat earnings estimates, but only beat revenue estimates by less than 1%. Goldman Sachs saw a whopping 150% increase in profits, but that was largely due to massive losses in their consumer lending business a year ago. As Gilani explains, “150% gain over a year ago. Yes, it’s fantastic, until you realize, oh, it’s not just because they had a good year last year and this year’s even better, no, it’s ’cause they had a horrible Q2 last year.”
So what does this all mean for you, the investor looking to potentially buy into these big bank stocks? Caution is key. As Gilani advises, if you’re going to chase these stocks at their current highs, make sure you have tight stops in place. “If you wanna go chase JPM, use a 11% stop. Or you know what? I’ll look around here. If JPM comes back down here to like, $190, I’d like to maybe buy it there, except if I bought it up here at $213, if you buy it tomorrow thinking you’re going to chase it, good luck.”
The bottom line is this: don’t be fooled by flashy headlines and surface-level numbers. Dig deeper, read between the lines, and understand what’s truly driving these banks’ performances. Are they sustainable, or are they being propped up by one-time gains and easy comparisons to weak prior years?
These are the questions you need to ask before putting your hard-earned money into these stocks. Because while the bull market may be raging on, that doesn’t mean every stock that’s rising is a sound investment. As Gilani warns, “I think things are getting just a little bit extended. And as far as JPM, I’m not overly impressed with those numbers. They were down year-over-year. So why all the bullishness?”
Why indeed. Click the video below for my full analysis and specific buy, sell, or hold recommendations on each of the six big bank stocks. Your financial future could depend on it.
Don’t get caught up in the hype. Be an informed investor. Arm yourself with the knowledge and insights you need to make the right moves in this market.
Stay sharp out there, my friends. And as always, stay tuned for my next “Buy This, Not That” video. Because in these markets, you can’t afford not to.
