Episode summary
Hightower's Stephanie Link on the key takeaways from big bank earnings
Summary
Bank earnings are showing a softer sequential backdrop than last quarter, with Stephanie Link saying the environment is "not as good as last quarter." JPMorgan’s results were a rare miss, and she said trading and capital markets were expected to slow but still looked weaker than investors hoped, even though equity trading remained a bright spot. Goldman Sachs and Citi had not yet reported, but she said expectations were already low and that banks now have to "beat and raise" to get rewarded.
Link was much more constructive on Wells Fargo. She described the turnaround there as "absolutely happening," pointing to in-line net interest income, better-than-expected net interest margin, lower expenses, and lower provisions. With the asset cap lifted and the stock trading at about 1.5 times book after being down on the year, she argued Wells Fargo looks like the better buy.
On the macro side, she said the consumer still looks resilient, credit quality remains strong, and the 10-year yield around 5.3% is not yet hurting demand. She sees risks if rates move materially higher, but also thinks AI investment remains a broad tailwind across chips, data centers, power, and the grid.
Key takeaways
- Stephanie Link said the bank setup was weaker than last quarter, with the bank index down 9.5% last month before earnings.
- She called JPMorgan a rare miss, though equity trading at $5 billion was up 49% year over year and the second best in history.
- Link said Wells Fargo’s turnaround is "absolutely happening" and called it the better buy because it is cheaper and benefiting from the lifted asset cap.
- She said banks need to "beat and raise" in this environment because low expectations alone are not enough to drive the stocks higher.
- Link said the consumer is still holding up and credit quality is very good, but a move in rates toward 6% could start to hurt.
Notable quotes
“THE ENVIRONMENT ITSELF IS NOT AS GOOD AS LAST QUARTER. SO SEQUENTIALLY THERE WAS THERE WEREN'T GOING TO BE QUITE AS AS GOOD”
“YOU HAVE THE BEST BANK. JP MORGAN MISSING IN A IT'S A RARE MISS”
“THE TURNAROUND IS ABSOLUTELY HAPPENING. IT'S VERY ENCOURAGING”
“THE CONSUMER IS STILL STRONG. YOU'RE NOT SEEING ANY ADDITIONS OUTSIZED ADDITIONS TO LOAN LOSSES”
“I THINK YOU HAVE TO WATCH INTEREST RATES OBVIOUSLY. RIGHT. I MEAN IF WE GOT TO LIKE A 6% NUMBER THAT MIGHT START TO HIT THE CONSUMER”
How the episode opens
Big bank earnings are coming out as if you've been watching the show so far. We have heard from jp morgan and wells fargo joining us now, Stephanie Link Hightower, chief investment strategist and a cnbc contributor who is here. She's not missing.
She's not missing. He's she actually is in here with us. I was going to start macro, but we already have numbers.
You can you can tell us all about do you want to start macro and just and just the environment itself is not as good as last quarter. So sequentially there was there weren't going to be quite as as good. And are we seeing that already?
Yeah we are. And you have the best bank. Jp morgan missing in a it's a rare miss.
I mean I'm trying to look for some positives here. But let's step back on the macro. We headed into the earnings season with the bank index down 9.5% last month.
Right. So that that was a big pullback. And I thought the setup was pretty good.
Headed into the print because expectations had come down seasonally. The third quarter is always softer than the second quarter. And last quarter was records.
And you can kind of say maybe it was the peak of the year in the second quarter. So really tough comparisons here, but it's a little worse than expected. I think we expected trading and capital markets to be lower sequentially.
We got that. But it was still up 15% for jp morgan year over year. It's just that it's not as good as what we saw last quarter.
So the one positive bright spot on jp is equity trading at 5 billion was up 49% year over year. So that's the second best in history.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- big bank earnings
- market trends
- stock market takeaways
- financials earnings
- investment strategy
Companies and tickers mentioned
- Hightower
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Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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