JP Morgan Chase (JPM), Citigroup (C), and Wells Fargo (WFC) kicked off earnings season on Friday. All three companies reported strong profits, as rising rates boosted interest income. Ken Leon, CFRA Research Director of Equity Research joined Yahoo Finance to share his biggest takeaway from the banks' quarterly results.
“It's really a sigh of relief that our largest banks are durable. They were able to outperform," Leon said.
He also pointed to strong consumer and commercial loan activity as a boon for investors, saying it is an opportunity for "investors to have higher confidence on the return of capital, whether it be dividends or share buybacks."
Watch the full interview with Dave Briggs and Rachelle Akuffo here.
Key video moments:
00:00:03 On biggest takeaway from earnings
00:00:19 On investor confidence
00:01:20 On the impact of regional bank failures on the big banks
00:01:40 On Wells Fargo's commercial real estate business
Video Transcript
RACHELLE AKUFFO: What was your biggest takeaway from today's earnings?
KEN LEON: Well, compared to the middle of March, it's really a sigh of relief that our largest banks are durable. They were able to outperform. And also, looking ahead, we're still seeing a healthy consumer. And there's a lot of commercial loan activity. So, overall, for the banks, particularly the largest banks, it looks like an opportunity to gain wallet share and for investors to have higher confidence on return of capital, whether it be dividends or for share buybacks.
DAVE BRIGGS: It's good to see you, Ken. So on the JPMorgan Chase earnings call this morning, Jamie Dimon was asked about the impact of Silicon Valley Bank collapsing. Let's listen.
JAMIE DIMON: Yeah, I wouldn't use the word credit crunch if I were you. Obviously, there's going to be a little bit of tightening. And most of that will be around certain real estate things. You've heard it from real estate investors already. So I just look at that as a kind of a thumb on the scale. It just makes the fast conditions a little bit tighter, increases the odds of a recession. That's what that is. It's not like a credit crunch.
DAVE BRIGGS: So it's not a credit crunch. How would you describe the impact of the SVB collapse as we move forward?
KEN LEON: It's opportunity and risks. For the largest banks, it's an opportunity to gain share. Where there's risk is for the smaller regionals or community banks that really depend on commercial loans, particularly commercial real estate. This is not a significant percentage of loans for a JPMorgan or a Citi. Wells Fargo actually gave quite a bit of detail out of their total loan book of 933 billion. Commercial real estate's about 33 billion, and office buildings, which is really where there could be distress, looking out one to three years, is under 15 billion. So I think it's framed right, and Jamie Dimon's comments are correct, mostly because they're sitting there as a global bank.
