Whenever you hear the banks are going to report their quarterly earnings, the first number you should pay attention is loan losses. Did the number go up or down? Banks are in the business of loaning money, are they getting repaid? If the answer is yes, then the profits should be healthy. If no, then the economy is in trouble.
In an article by Anirban Sen, Elizabeth Dilts Marshall and Imani Moise of Reuters, the banks announced they are hopeful they can generate growth this year. There are many issues on the front pages, but the banks have not experienced major disruptions to their core businesses.
JP Morgan Chase reached new profit levels; Citigroup had 16 consecutive quarters of loan and deposit growth and Wells Fargo is adding new depositors.
JP Morgan Chase generated $36.4 billion in profit. All but one business units, revenue grew. Thanks to the new China-US trade deal, JP Morgan opened more than 70 branches in new markets and China.
Citigroup which once was a consumer powerhouse, but now concentrates on institutional clients business expand its reach. Citigroup is reaching consumers through its digital banking.
Wells Fargo which has a new CEO is still cutting costs, but revenue was in line with expectations as well as loans and deposits increased.
Linking to dividend paying stocks, it is hard not to own the large banks because they generate profits, it is always how much? The main aspect to investing in banks is credit quality or loan loss provisions, you want the bank to be both aggressive in getting business but those businesses pay their bills. If the credit quality stays high and the folks who are in charge keep a tight reign in house then the bank is worth holding on to.
There are more questions than answers, till the next time – to raising questions.