Commentary: US banks kick off the earnings season with a positive surprise
On Friday, number of large US banks reported their latest quarterly earnings, with almost all beating both top and bottom line forecasts. JPMorgan reported the EPS of $4.10 and the revenue of $91.9bn (vs $3.41 and $89.7bn forecasts), Wells Fargo & Co. reported $1.23 and $20.7bn (vs $1.12 and $20.1bn forecasts), Blackrock reported $7.93 and $4.2bn (vs $7.75 and $4.3bn forecasts), and Citigroup reported $1.86 and $21.4bn (vs $1.70 and $20.1bn forecasts). Investors cheered the stronger-than-expected performance, as the S&P 500 financial sector rallied 2.8% w/w, outperforming every other sector. These quarterly results demonstrate that, despite the recent turmoil, large, diversified banks are positioned well enough to weather the potential deterioration in economic conditions relatively well.
In terms of macroeconomic developments, the February US CPI report was in the spotlight last week. The headline CPI came in below expectations at 5.0% y/y (vs 5.2% forecast). However, the reading did not cheer the markets overall, as the core figure increased from 5.5% y/y to 5.6% y/y in February, demonstrating inflation stickiness in less volatile areas.
Lastly, the March US retail sales have surprised on the downside. Retail sales contracted by more than expected rate of 1.0% m/m (vs -0.4% forecast). The reading was second-worst in past 12 months, demonstrating that weakening consumer confidence is slowly taking a toll on the US economy.
