Episode summary
Bank Earnings Are In: Here’s What They’re REALLY Saying About the U.S. Economy | The Weekly Wrap
The Real Eisman Playbook
· · Hosts: Steve Eisman
Summary
Steve Eisman argues that the latest large-bank earnings point to a still-benign U.S. credit environment, despite rising anxiety around private credit and software exposure. He says the big lenders — JPMorgan, Bank of America, Wells Fargo, Citi, Goldman Sachs, and Morgan Stanley — are valuable because their consumer and commercial loan books give a broad read on the economy. On his telling, non-accruing loans were not showing the kind of broad deterioration that would signal a developing credit cycle.
He also says the market is currently trading on headlines around Iran, with oil spiking and then retreating as investors hope for a settlement. Eisman notes that the S&P 500 and Nasdaq moved from being down earlier in the year to positive and at record highs, which he interprets as the market assuming the conflict will be short-lived.
On bank results, he highlights strong quarters from Morgan Stanley, JPMorgan, Citi, and Goldman Sachs, while Wells Fargo disappointed on net interest income. He frames valuation as a function of return on tangible common equity, with capital-markets-heavy banks earning higher multiples than more lending-focused banks. In the mailbag, he says regional banks in KRE have little direct private-credit exposure, and he thinks any losses from private credit would likely be an earnings issue rather than a systemic capital problem.
Key takeaways
- Eisman says large-bank credit data is still “very benign,” and he sees no clear recession signal in current non-accrual trends.
- He argues JPMorgan, Bank of America, Citi, Wells Fargo, Goldman Sachs, and Morgan Stanley give the best window into the U.S. credit cycle.
- He says regional banks in KRE have little private-credit exposure; the bigger exposures are at the largest institutions.
- He thinks private-credit losses, if they emerge, are more likely to hit income statements than create a systemic capital problem.
- He says software remains too early and too negative to bottom-fish confidently, so investors should “tread carefully.”
Notable quotes
“My conclusion, the credit trends reported by the large banks are very benign”
“As the banks go, so goes the economy”
“Regional banks do not have the lion share of exposure to private credit”
How the episode opens
Over the weekend, talks between the US and Iran fell apart. The US is blocking the straight of hormones to put economic pressure on Iran. The market went up this week as there is still hope that a settlement will be reached.
We will have to see. We've had 17 years of amazingly benign credit quality and investors are wondering if the good times are over. The banks kicked off earning season and I'm going to share some thoughts on a bunch of the large banks that reported because they provide great insights into the state of the current credit cycle.
We can get a closer understanding of whether the problems in the private credit sector are broadening into a larger credit cycle. As the banks go, so goes the economy. Hi, this is Steve Eisman and welcome to another episode of the weekly rap.
This is for the week ending Friday, April 17th, but recorded Thursday night, April 16th. I'm excited to share that in a few weeks, we'll be announcing an additional feature to the Real Eyesman playbook alongside our existing Monday and Friday episodes. This is something we've been building behind the scenes and it's going to take things in a really exciting new direction and we'll be revealing more soon.
Make sure you're signed up for our mailing list on our website realismanplaybook.com so you're the first to know. Before we get to the rap, I want to comment on something. I often get requests from viewers to provide more trading ideas.
And that's not something I tend to do for two reasons. First, I'm not a trader. I've always taken a long-term perspective.
Trades do not come naturally to me. That's just me. However, there is another reason.
Taxes. After all, it is tax season.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- bank earnings
- u.s. economy
- iran geopolitical tensions
- private credit
- ai and software risks
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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The Real Eisman Playbook, this episode and its artwork belong to Steve Eisman. Octagon is not affiliated with the show; this page is an independent summary.
