After the recent turmoil in the banking sector due to cash sorting and a few runs on regional banks, it was important to review the results from the sector for the first quarter of the year.
Goldman Sachs, JP Morgan, and other major banks have recently reported their earnings for the first quarter of 2023. Despite a challenging economic environment, most of these banks have reported strong financial results, exceeding expectations in some cases.
Goldman Sachs reported a messy quarter with diluted EPS of $8.79 ahead of Bloomberg consensus of $8.21 along losses in the commercial banking division Marcus and slower progression in the trading division.
JP Morgan, the largest bank in the United States, reported EPS of $4.10 ahead of consensus in the first quarter of 2023. JP Mogan also reported a return on tangible equity of 23%, a very positive result. The bank's revenue increased by 25% year-over-year, driven by strong performance in its investment banking and consumer lending divisions.
Other banks that reported strong earnings for the first quarter of 2023 include Morgan Stanley, Bank of America, and Wells Fargo. Morgan Stanley reported a net income of $4.2 billion, or $2.73 per share, in the first quarter of 2023, an increase of 41% compared to the same period last year. Bank of America reported a net income of $7.3 billion, or $1.09 per share, in the first quarter of 2023, an increase of 49% compared to the same period last year. Wells Fargo reported a net income of $5.5 billion, or $1.35 per share, in the first quarter of 2023, an increase of 59% compared to the same period last year.
The takeaway from this earning season seems to be that the recent sector turmoil is not affecting negatively the earning profile of large banks and in fact it may promote more consolidation in the space in favor of the large money centers.
In conclusion, the first quarter of 2023 has been a positive period for the banking industry, with most major banks reporting strong financial results. However, the global supply chain issues, inflationary pressures, and uncertainty in the geopolitical environment continue to be significant concerns for the banking industry.