One big bank is not like the other.
Financial giants J.P. Morgan and Wells Fargo kicked off earnings season on Friday, both issuing better-than-expected results. But while J.P. Morgan’s stock soared nearly 5%, Wells Fargo’s stock slid, ending the day almost 3% lower.
Wells Fargo’s weakness came largely from softer profit guidance from CFO John Shrewsberry, who told analysts on a post-earnings call that he expected net interest income to fall by as much as 5% this year.
But the pain only accentuated J.P. Morgan’s record first quarter, which was also buoyed by notably bullish comments from CEO Jamie Dimon on the company’s conference call.
“J.P. Morgan has set an unbelievable tone,” Quint Tatro, managing director of Joule Financial, said Friday. “I think we’re going to see that from more of the consumer-focused banks, but I don’t think that they’re going to reach nearly the levels that J.P. Morgan did. I mean, they’re firing on all cylinders.”
Speaking on CNBC’s “Trading Nation,” Tatro said the “greatest thing” about J.P. Morgan’s report was its net interest income growth, up 8%, and the 2.5% lift in its net interest margin. Both results signal strong consumer confidence, he explained.
Meanwhile, “Wells Fargo obviously missed on revenue, and the only reason profits were up is because of cost-cutting,” Tatro said. “And the tape is telling you today that investors obviously were not convinced.”
So, while Tatro wasn’t totally bearish on Wells Fargo’s prospects, calling it “fine from a dividend standpoint,” he had a clear winner in mind.
“If you want to hold the financials across the board, I think they’re going to be good dividend plays and consistent names,” he said. “But the winner, in our opinion, clearly is J.P. Morgan, and I don’t see anybody else touching them, into next week’s earnings as well.”
Craig Johnson, managing director and senior technical research analyst at Piper Jaffray, had a slightly different outlook.
While the space’s other major players, including Goldman Sachs and Citigroup, are reaching what the technician called “very interesting inflection points” that could serve as launching pads for their stocks, one in particular stood out to him as the most promising.
“We need to see those break topside of that, start to reverse some of those downtrends and also move above some of those declining moving averages for this to be a more sustainable move,” he said, turning next to the chart of Morgan Stanley.
“When I look at this, we’ve already done the downtrend reversal,” Johnson, who runs Piper Jaffray’s technical research group, said in the same “Trading Nation” interview.
“We’re starting to see that this stock has been putting in some very low levels, some lower lows, lower highs in here, and it’s really starting to reverse the downtrend,” he said. “To me, Morgan Stanley’s the most attractive-looking name of those names that are going to be reporting next week, so … that would be the one we’d be focusing on right now.”
Shares of Morgan Stanley gained over 4 percent in Friday’s trading session. The company is expected to report earnings on April 17.
Disclosure: Joule Financial has positions in J.P. Morgan and Wells Fargo. Piper Jaffray makes a market in the security of, and will buy and sell the securities of Citigroup on a principal basis.
