There's a fundamental strength behind Big Bank Q2 earnings, strategist says

There's a fundamental strength behind Big Bank Q2 earnings, strategist says



and guys you've had a little time to look through it Marty you told us last time around it was that net interest income that you were a little concerned about the cutting exposure anything else that you think this might tell us about the other banks and what we should be watching for the rest of earnings season well we will make sure of is you know we're seeing the pressure and I and we haven't really had the Fed cut any rates so it's not really the short-term rates moving lower creating the pressure we're seeing now this is really the tail end of rising interest rates and funding costs moving higher so we're about to get some relief from that as the Fed begins to cut rates and we're about to see the inverted yield curve right sighs and get more flat which will also take a negative way so all in all what we're gonna see is NII not net interest margin but NII continuing to grow with the capital story on the back end which would kind of keep watching because share counts are going down six seven and at some instances ten percent which is a really strong catalyst for these banks Mike what do you think I mean the backdrop for the bowl case let's say on banks is that this particular quarter probably shouldn't be that big a swing factor because they're are so cheap relative to the market they're buying back so much stock they yield three per say it's really a bigger picture sector story that they are kind of underappreciated I don't think these numbers do anything to argue against that and in fact if anything the strong retail sales number is kind of your reason to think that the bank's potentially have gotten too cheap meaning we did we over anticipate a downturn in the economy the consumer is still strong Jamie Dimon talking about that right now so that's that should be all good inputs the question is will the market hear it is the market going to continue to just penalize this group for being essentially no growth just all about balance sheet financial engineering Marty I mean it look banks may not be what they once were but there's some great news that we've seen and some great performance by some of these companies including JP Morgan which is trading down by one point seven percent well and what the backdrop we just talked to Mike just talked about the economic growth the loan and deposit growth has been favorable and then if you go down like Goldman Sachs everything was favorable in the equity side invested in lending fixed income was the only thing we saw some weakness in there so tangible values keep growing returns continue to stay flat to move higher your EPS is growing so there's a fundamental strength behind the story credit costs remain low and so really what we have to do is fight back what we're gonna see a little bit of which is margin compression this quarter that's going to kind of invigorate that story a little bit more and then we got to see the Fed cut in July and then see that numbers will still kind of hang in there and profitability won't be as negatively impacted as anticipated right now and then that's where towards the back end of the year the banks can outperform again Marty which of these stocks would you buy right now so Goldman's the one we talked about in the the kind of money center side when we look at the super regional banks what we want to see is those banks that are kind of restructuring so we talked about going into earnings or Bank still that we've seen like Regions Bank or Zions or you kind of roll into even like first horizon who reported well this morning also we look for a high-quality bank like MIT bank is a really good safety net for those that want to have some protection if things were to deteriorate so you know those are the ones that we want to look at that the market is over anticipating impacts that aren't going to happen and as they've changed their their overall business mix they've solidified and don't have as much pressure on the downside when short-term rates go down they'll outperform like we said in the back half of the year Mike we're bumping up against new highs every day and trading higher off of that once again this morning look pretty good precursor for what to expect the markets holding holding those highs right now I mean I think right now you can sort of make the case that you know up 20% you're today we've priced in a lot of the good stuff that we anticipate including probably in July rate cut but the bull again the bull case is that people don't really believe it that much and you've been people have been kind of taken by surprise that the strength and maybe feel that's why you by the way yesterday trading volume really low volatility has really drained away from this market that can be you know just kind of a market that kind of goes in the direction of least resistance which right now is to drift higher but earnings estimates I mean earnings reports are always gonna just kind of like rap index level vault in the brief pullback that the market has had over then this year you know how many times people have calculated the market cap losses due to the tariffs that's that's been one exercise yeah sure I heard five trillion eight trillion so just being where we are right now with the tariffs doesn't I mean yes trillion dollars in market cap has been has been cost by the by the towers there's no I'm talking about when when it was down people are put to say that was a horrible move we've lost five trillion dollars how deep Trump how do you say this to investors I mean I've hit the same person has said it like five or six times and now we're at new high so is it because of the Fed or but are you asleep I'm saying that obviously the tariff on everything you know what I'm saying and the best rallies in this bull market and the way of waiting on yeah when a bad thing that we were anticipating didn't happen but the terrace you still on it's just ago you