The bear market in stocks negatively impacted capital markets-related earnings, but the core lending business of the banks remains healthy.

Additionally, while the banks are preparing for future possible loan losses by increasing reserves, actual delinquencies and credit trends have remained benign so far and, according to JP Morgan, better than pre-Covid. Loan balances were higher for the group, so when combined with better net interest income drove better net interest income (NII). Net interest margin (NIM), the spread a bank earned in interest on loans compared to the amount it paid in interest on deposits, has improved across every bank so far.

Then why did banks rally last week? As previewed last week, headline earnings were bound to be disappointing due to increased loan loss reserve, but core earnings from lending have benefitted from rising interest rates. Overall the headline bank earnings were worse than expected, leading to a deterioration in the blended earnings growth rate for the financial sector. Bancorp TBBK (USB), and Wells Fargo WFC (WFC) fell short of estimates while First Republic (FRC), PNC (PNC), and Citigroup C (C) beat. JPMorgan (JPM), Morgan Stanley MS (MS), U.S. Headline earnings from the banks were a mixed bag. S&P 500 Earnings & Revenue Estimates Glenview Trust, FactSetīank and financial earnings dominated the first week of the earnings season. A previous piece discussed why Warren Buffett’s Berkshire Hathaway BRK.B could be adding to its stake in Occidental Petroleum. On a related note, regulatory filings showed that Berkshire Hathaway continued to buy shares of Occidental Petroleum OXY (OXY) last week and now owns over 19% of the company. The energy sector has benefited from increased energy prices, with expected earnings rising again last week and slated to increase by 255% year-over-year.

Only three sectors, including energy, health care, and consumer staples, are expected to post higher earnings than expected on June 30th. The high earnings growth rate for the industrials is a bit misleading this quarter, since the airlines reported a loss in the second quarter of 2021 and should post a profit this quarter. S&P 500 Earnings Season Glenview Trust, FactSetĪt this early juncture, blended earnings, which combine actual with estimates of companies yet to report, are only slightly higher than forecasts at the end of the quarter and actually fell last week.

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