The big Wall Street banks just launched the latest round of earnings reports; here, fund manager and value investor John Buckinghamand editor of The cautious speculatorreviews the results of three major investment banks.

The financial results for the first quarter are below analysts’ expectations. to JPMorgan Chase (JMP). The largest U.S. bank earned $2.63 per share (vs. $2.72 estimated), a substantial change from EPS of $4.50 a year earlier, but it’s worth noting that $4 billion of loan loss reserves were released (in favor of BPA) in the first quarter of 2021.

This time around, JPM added $902 million (subtracting $0.23 from EPS) to its reserves in the last quarter, reflecting its view of a higher likelihood of downside risks due to high inflation. and the war in Ukraine, and exhibits associated with Russia.

JPM remains a preferred holding in many of our diversified portfolios, and management was optimistic about loan demand for the year ahead, although several previously noted risks loom on the horizon.

We continue to like the multiple levers available to generate royalty income in varying environments, and we maintain our fondness for Mr. Dimon, who is willing to take a long-term view, spending to improve various abilities, even s is limited to the short term. term pay. The shares are trading at less than 11 times the consensus EPS estimate for fiscal 2022 (nearly 60% of the market multiple) and the dividend yield is 3.2%. Our target price for JPM is currently $184.

Goldman Sachs (GS) earned $10.76 per share in the first quarter, well down from $18.60 a year earlier, but about the same level as in the fourth quarter. After the 7% overshoot last quarter, Street analysts went “under” this round, as estimates were around 20% lower than the actual impression.

After a successful 2021, this year is likely to be a year of normalization for parts of the business, but as with other large diversified financial giants, lagging performance in one segment has generally been offset by stronger performance from another. Goldman’s stock subscription all but came to a halt in the first quarter, but the $7.9 billion generated by the company’s trading activities more than offset the loss. Additionally, net interest income has increased every quarter since its low in the second quarter of 2020.

Shares have lost almost a quarter of their value since the 52-week high was set last November. With Goldman gaining more than 15% on tangible equity, we find the stock cheap, trading for a single-digit multiple of the consensus 2022 EPS estimate and just above the tangible pound per share. And even though projections have come down somewhat in recent months, we’re not ruling out $40 EPS for 2022, which would make the stock even more attractive.

We continue to appreciate the healthy balance sheet and the solid strategic repositioning underway. The development of its traditional banking and investment management business should serve shareholders well in the long term, as management attempts to evolve the trading and trading titan into a more comprehensive financial company with consumer and commercial businesses. more stable. The dividend yield is 2.5% and our target price is now $462.

Morgan Stanley (MS) posted first-quarter EPS of $2.06, down 7% from the same period a year ago but more than 50% higher than the pre-pandemic figure. The bank was just short of its return on tangible equity target of 20% as investment banking fees fell. Fueled by market volatility, the commercial department led the way in the quarter, earning more than $6 billion. Wealth management revenue rebounded from the fourth quarter despite a pullback in equities and fixed income.

We continue to like the diversified acquisitions of Eaton Vance and E*Trade, which we believe give MS greater scale in technology, a deeper product and services base, and investors. autonomous to complement wealth management clients assisted by advisors.

In the near term, we believe capital markets activity will pick up throughout the year, while MS should benefit from significantly higher rates and we see the opportunity for the business to take a greater portfolio share in wealth management. The shares trade at 11 times EPS estimates and offer a dividend yield of 3.3%. Our target price remains $120.

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