The results of the US banks are much above expectations

The season of publication of companies' results for the second quarter has started. Last week, several large financial institutions such as JP Morgan Chase presented their results, BlackRock or Wells Fargo. Despite their excellent results, banks are much cheaper than other industries. We will learn about the results of the companies in the coming weeks.

About the author

Pawel Majtkowski - analyst eToro on the Polish market, which shares its weekly commentary on the latest stock market information. Paweł is a recognized expert on financial markets with extensive experience as an analyst in financial institutions. He is also one of the most cited experts in the field of economy and financial markets in Poland. He graduated from law studies at the University of Warsaw. He is also the author of many publications in the field of investing, personal finance and economy.

Season of financial results

The US earnings season for the second quarter is underway. This is an important moment for the capital market, as it allows us to assess the condition of individual industries and companies and the prospects for the coming months. Higher profits also increase the value of individual companies, which gives space for further increases on the stock exchange. And the earnings predictions are very good, much better than at the beginning of the second quarter. In the previous quarter, 85,3%, i.e. 426 companies from S & P500 index outperformed the anticipated results. Now it can get even better. Revenues of US companies may increase by 20%. y / y and EPS (Earnings per share - earnings per share) by 72 percent. There may be even greater growth in Europe. The biggest increase in profits will come from cyclical companies (such as energy suppliers, trade and banks), which are beneficiaries of economic recovery. Of course, we must not forget about the "low base" effect resulting from weaker results in 2020, which makes increases in many cases spectacular.

Better than expected

Last week, 8 percent presented their results. American companies. The season of publication of results was started by financial companies, whose results turned out to be better than expected, but their share prices are still undervalued compared to the rest of the market (C / Z lower by 43% compared to the market as a whole). The largest American bank, JP Morgan Chase, presented its results on Tuesday. Its revenues amounted to $ 31,4 billion, compared to an expected $ 29,9 billion. EPS is $ 3,78, or 18 percent. above the expectations. The bank's good results are the result of the release of reserves for bad loans worth USD 3 billion, along with the improvement of the economy, the quality of the loan portfolio improved.

The investment bank Goldman Sachs also presented excellent results. Its EPS amounted to USD 15,02 against analysts' expectations of USD 10,24. Such a significant breakthrough of market expectations is the result of the increase in the value of assets and profits from the IPO market. The bank's share price has increased by over 40 percent since the beginning of the year. Goldman also announced a planned increase in its quarterly dividend payout by 60 percent, to $ 2 per share, which is expected to take place in the third quarter of this year.

Wells Fargo also performed similarly, with EPS of $ 1,38 against a forecast of 97 cents, which was also a result of released reserves. Investors were very eager to invest their resources in funds managed by BlackRock, thanks to which the company currently manages a portfolio worth 9,49 trillion. dollars (a year ago it was $ 7,32 trillion). Although the EPS was USD 10,03 against the expected 9,46, the BlackRock share price dropped as investors expected even more from the company, especially as the current increase in assets is largely related to low-margin ETFs. According to the statements of bank managers, while the results were published, they expect good results in the coming quarters. The greatest risk for the market remains the delta coronavirus variant and its potential effects.

This week is the continuation of the festival of publishing the results. We are awaiting the publication of the results of companies such as Netflix, Intel, Twitter and Snapchat.