Bank earnings season has arrived, and there’s a lot more questions than usual.
Results will be parsed not just on whether the U.S. economy is about to head into a recession — the latest data hasn’t been great — but also how well banks have done in retaining deposits that otherwise are flowing into money-market funds, and how far the bonds they have bought have dropped in value as interest rates have climbed.
The Oakmark Fund , the value-focused fund with $15.5 billion in assets under management, highlighted one lender it recently bought: Truist Financial.
“We believe the company’s reputation, relationships and liquidity profile will allow it to weather this storm without material negative impact,” he says.
Truist, he argues, now trades at a single-digit multiple to its normalized earnings power. “We believe this is a very attractive price for such a high-quality regional banking franchise that has historically generated a high-teens return on its tangible equity,” he says. A bonus — its insurance brokerage subsidiary, which alone is worth as much as 35% of the current stock price based on a recently announced minority stake sale.
Truist will report results on Thursday.
Another company the fund picked up is very different: Kroger KR,
U.S. stock futures ES00,
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Here come the earnings: JPMorgan Chase JPM,
JPMorgan shares climbed after stronger-than-forecast results, and Wells Fargo also beat estimates.
Data released after the close on Thursday showed that banks reduced their borrowing from two Federal Reserve backstop facilities, though it still was an elevated $139.5 billion.
U.S. retail sales highlights the end to a busy week on the economic calendar, with releases on import prices, industrial production, business inventories and consumer sentiment also on the docket. There’s also a speech from Fed Gov. Christopher Waller.
Japan has approved its first casino, that will be built by MGM Resorts MGM,
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