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even though jp morgan beat on earnings which were reported this morning the stock is falling down about 2.7 percent yes they exceeded expectations big banks begin reporting third quarter results but the markets just don't love how they beat expectations okay so here's what happened jp morgan reporting 30.44 billion dollars in revenue 3.74 cents per share in eps and in essence a lot of the profits were propelled in great part by the release of reserves that had been put aside during the pandemic ceo jamie dimon got on the conference call sounded a very optimistic tone that the economy is still on a positive post pandemic trajectory i think we should look at the big picture here which i think is always important i mean two years ago we were facing covid virtually a great depression global pandemic and that's all in the back mirror which is good so by hopefully a year from now be no supply chain problem okay hopefully but guess what jamie dimon also said dick beauvais that he says inflation is definitely going higher although he's not worried about it for the bank let's get to you and what you saw in the bank's quarterly release numbers and we've got a whole bunch of other names too dick bovey of course with odeon capital thank you so much for being here so let's tackle jp morgan first dick okay basically uh what you said is exactly correct all year banks have been having a great deal of difficulty in increasing their operating earnings but what they've been able to do to obscure that fact is continue to reduce their loan loss reserves now in the beginning of the year investors were accepting the fact that they were doing this and did not hit the stocks but now investors are saying oh wait a minute you know we've been nine months into this year and these companies can't increase their operating earnings if they can't do that and they continue to play accounting games how much how much can they be worth and i think that that's one of the key reasons that this uh you know jp morgan number frightened most people in addition jamie dimon frightened most people he said three things number one he wouldn't commit to the fact that inflation would be transitory number two he said the base case for the economy even though he said it's going to be higher is not going to be as high as it was a few months ago and number three uh perhaps the worst thing he said was that he's on a 10-year program to allow the bank to meet the competition in the marketplace and what banks have been dealing with all year is not the fact that there's excess liquidity in the economy but the fact is that they're losing market share they're losing market share to the capital markets companies and they're losing market share to non-bank financials and therefore what jamie dimon projected today was a little bit of fear as to which jp morgan is going to be over the next 12 months and that's resulted in the selling why isn't he fearing inflation he said yes it'll go higher but ostensibly as inflation goes higher maybe the fed starts to raise rates that helps bank earnings obviously because they can charge more for lending they make more revenue but he also said people are still going to open bank accounts they're still going to be fine with inflation at least for the banking sector let us spin it forward to tomorrow we are getting a whole host of names wells fargo we've got citigroup on deck which ones in this panoply of names do you feel will do well and what are you concerned about with some of the other names okay just going back to inflation for a second remember banks make a fortune in inflationary periods i mean in the 1870s banks benefited enormously from inflation because their unit volume goes up and their their margins go up but in terms of the companies coming out the the one that i'm going to be looking most closely at is bank of america bank of america has been losing market share on a consistent basis now for a few years and and bank of america as a result has changed or turned over 25 top executives in the company to get the bank back on on the pace of trying to increase its share growing its business so if they're able to do that i think bank of america could be an extremely interesting company uh wells fargo is in i think uh the same position as most of the other banks out there it's dealing with the fact that loan volume is weak margins are under pressure and it's still facing all of these problems with uh you know uh fines and and problems with litigation but i think wells fargo will emerge as one of the strongest banks in america over the next few years citigroup is an international player and i don't like international banking at the present moment china being one of the big reasons you know for that i think that citigroup uh is is the weakest of all of the banks that i just mentioned and therefore that's one that i would tend to stay away from city down about half a percent most of the financials are lower today give me a one line on goldman they're reporting friday i love it i mean you got to buy goldman you got to buy morgan stanley you know they're going to show big numbers and they're going to show big numbers because merger and acquisition business which is their most profitable business soared in the quarter uh some said well jp morgan had a tripling uh in in even smaller companies jeffrey's tripled its money from m a and these companies are the leaders in m a so you got to be buying goldman and you've got to be buying morgan stanley dick always a pleasure thank you so much for coming on
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