Are the banks finally back? Are they investible despite rates not rising and the economy perhaps weakening?
Let's just say for the moment that they are no longer sells and they could be buys simply because of how much darned money they make and how they make it.
The big banks that have reported, Citigroup (C) Monday, JPMorgan Chase (JPM) , Wells Fargo (WFC) and Goldman Sachs (GS) yesterday have made a combined total of $29.5 billion dollars. That's astonishing.
JPMorgan alone made $9.6 billion. Bank of America clocked in $7 billion. I can't emphasize enough these are just extraordinary profits. When you make that kind of money you deserve to trade at a higher price to earnings multiple than you did before you reported those numbers.
Plus, I love how they made it. JPMorgan is just a powerhouse. Every line I thought was better. Every line. There are a dozen lines. The best is the consumer and she is spending and spending well within her means. In fact she should spend more because she's so liquid. JPMorgan's firing on all cylinders: Credit quality, great, commercial bank, good, expenses, very good. Looks like it is the highest quarterly bank report in the history of the world. Eleven times earnings, almost 3% yield. Buy.
How about Citigroup? Much bigger revenues than expected. Much bigger earnings than expected. Bought back 54 million shares - why not much more was purchased below tangible book of $67.64 where every share removed is additive to earnings. The bank plans to continue to buy back stock hand over fist, with the three year capital return program being boosted from $60 to $62.3 for this $160 billion bank. Great efficiency ratio - what they actually make. Powerhouse worldwide earnings. Nine point five times earnings, 2.5% yield. Buy.
Goldman Sachs has long been crushing the numbers on the earning side but not showing the growth I like. Not this time. Revenues were $9.46 billion versus consensus of $8.839 billion and investment banking and equities - think underwritings - were much better than expected.
The stock of Goldman Sachs has been hurt by the episodic, herky-jerky nature of its sales. That's over. The company has gone from under 50% consistent earnings power to over 60% and it's going for much higher than that. You get recurring revenue streams at Goldman you get a much higher price to earnings multiple. It's nuts that this company's stock sells at less than 9 times earnings, especially with the launch of what may be the biggest credit card in history, the Apple (AAPL) card. Tangible book is $203 and it's only at $215. The best for less: Buy.
How about Bank of America (BAC) ? It was a small beat but a beat none the same. The fact is though, with its consistent revenues and earnings, with its remarkable digital interface - it has the best digital banking with 37.3 million users up from 35.7 million last year - this company is a money machine. It's a 24/7 ATM profit spitter. Twenty-five percent of all consumer sales are from digital, 50% come from mobile, 33% of total consumer mortgage applications came from digital. These are insane numbers, and clearly indicative that it's no longer just millennials. This is share take of everyone who owns a smartphone. That keeps their costs down as any transaction done on line is much less expensive for the bank than a person to person exchange. Incredible efficiency.
And what if they won't get rewarded? They will keep buying back stock and upping the dividend. They have a $37 billion capital return plan over the next four years. At 10 times earnings who can blame them. Buy.
The only fly in the ointment was Wells which can't get efficient enough, I think because it is still struggling from the woes of the cross-selling scandal. Nevertheless, it did have $5.8 billion in net income and if they could ever get a CEO, who knows what could happen!
Look, these are amazing numbers. I know that if you don't buy the shares, they will. I have never seen a more sanguine group of CEOs with rates coming down which will hurt their bottom line. No matter: the profitability here is staggering. And it is more consistent than I have ever seen because the consumer is the best I can ever recall.
Yep, you guessed it: Buy all but Wells Fargo, and if I get a CEO I like, I will tell you to buy that one, too.
(Citigroup, JPMorgan, Goldman Sachs and Apple are holdings in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells C, JPM, GS or AAPL? Learn more now.)
