Banks Report Blowout 1Q Earnings, Smashing Expectations by Releasing Loan Loss Reserves

Bank earnings are out. Oh, those paragons of fairness, honesty, and everything good about America. They're kicking in doors and taking names with their first quarter results so far.

Goldman Sachs was the first to rock onward into the second quarter with stunningly-positive results from the first. The investment bank reported revenue of $17.7 billion and GAAP earnings of $18.60 per share, crushing analyst estimates on both earnings and revenue. Goldman Sachs declared a quarterly dividend of $1.25 per share, in line with the previous dividend. The investment banking segment generated record quarterly net revenues of $3.77 billion.

Goldman Sachs was up two percent after the news, but the clincher is how well its done since the start of the manufactured crisis of 2020. The stock has risen from a low of 138 last March to its current price of 335. That's a 142% gain in just over a year's time. Even Bitcoin hodlers can be impressed by those numbers.

JP Morgan Chase, however, really set the tone for the narrative of the current earnings season. By slashing their credit loss reserves by some $5.2 billion - all recorded on the books as profit - they smashed analyst expectations, delivering a quarterly EPS that was nearly 400% better than what they posted in the same period a year ago.

Those results came in on Wednesday. Thursday morning, prior to the opening bell, Bank of America reported, and, right on cue, dropped $2.7 billion from its credit loss reserves, sending that money straight to the profit column. The bank reported EPS of 0.86 per share, as opposed to expectations of 0.65. Without the credit loss provision reclaimed, BAC may have still beaten the estimates, but only by a slim margin.

Citigroup was next up. Net income tripled to $7.94 billion, or $3.62 per share, from $2.54 billion, or $1.06 per share, a year earlier. Analysts on average had expected a profit of $2.60 per share, according to Refinitiv IBES data.

The bank's bottom line was bolstered by its decision to draw down $3.85 billion in reserves it had built up for expected loan losses. So, subtract the reserves from net income and they did $4.09 billion in the quarter. EPS would have been $1.86 per share. Better, but not nearly the blowout quarter they reported.

And so it goes. Banks have everybody believing that the economy is buoyant and thriving and recovering. Other companies in other industries may not meet up to the standards of bang-up earnings the banks have provided because they just don't have as many ways to cook the books.

Sure, it's fine to finally be done with the fake crisis, maybe, and things are getting better, but certainly not as good as the banks' earnings would have one believe.

Stocks are set for a monster open after the Labor Department reported first time jobless claims at 576,000 in the reported week, a one-year low.

Hang on. It's going to be a busy Thursday.

AT THE CLOSE, WEDNESDAY, APRIL 14, 2021:
Dow: 33,730.89, +53.62 (+0.16%)
NASDAQ: 13,857.84, -138.26 (-0.99%)
S&P 500: 4,124.66, -16.93 (-0.41%)
NYSE: 16,000.15, +37.80 (+0.24%)