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Free Check-Up On The Market And Economy, Sponsored By Big Banks Banking earnings are out to kick off the season, and the profit centers, as well as contractions, can tell you a lot about the current state of the market

By Gabriel Osorio-Mazilli

This story originally appeared on MarketBeat

Economy and banks

Earnings season is back, and as usual, it is kicked off by the most widely watched names in the world of finance; after all, these are the kidneys of the economy that let us know when something is becoming too toxic and needs good filtering.

Today, with all the homework done, you can get a free check-up on the stock market and the economy. Covering what matters - the protein, so to speak - within the main banks' earnings reports, you, too, can arm yourself with the necessary data and conclusions to steer your personal finances (and investments) to success.

To keep things simple, you will go over the main KPIs (key performance indicators) within these banks, letting you make your own assessments as to whether things are looking up or beginning to become slowly shaky. You could even consider some of these stocks for yourself.

Tailwinds at the Center

The diversifying factor for bank stocks like the ones making headlines today is the diverse ways they can execute business to generate fees and revenue. With financial services at the core, sales and trading at another edge can often be a money-printing department.

With the global economy moving in a different tune, pockets, like fixed income and volatility in equities, are making room for continuously bullish outlooks at these institutions.

All of Wells Fargo (NYSE: WFC), Citigroup (NYSE: C), and JP Morgan Chase & Co (NYSE: JPM) reported on these similar trends, pushing their stocks higher during Friday's market session.

With the United States FED pushing interest rates higher in its campaign to combat recently rampant inflation rates, financing has become a more costly endeavor. However, this does not need to mean bad news for everyone.

These banks are professionals at lending money, and their net interest incomes show how profitable this activity is today. Wells Fargo beat analyst expectations for net interest income (NII), showcasing the strength of these departments, which still offer room for growth despite faltering deposit rates.

Following the figures, management has also guided toward higher expected NII for the year and coming quarters, expanding on the momentum that current financing rates and underlying economic activity are providing.

The story has a slightly different beat for Citigroup, though it is within the same symphony. NII rose by 10% over the year at the bank, though the chunk of expectation-beating results came from volatility itself.

A $2.8 billion windfall from trading activity boosted the bank's bottom line, sponsored by the rising levels of market volatility. Again, this bank has guided this trend toward continuing in the future.

For JP Morgan, NII goes to the top of the podium. A massive 30% jump from last year shows that size does matter for the industry, allowing for more economies of scale and lending activity to generate these profits.

How is all of this useful for you? You could take this as a sign that markets will continue to see high - or higher - yields and a lot of volatility, though checking with analysts can act as a certainty proxy.


The fact that all three stocks are up significantly during Friday's session can be the first sign of good news (for those benefitting from high yields) ahead. However, it can be beneficial to check the long-term sustainability of these trends.

Analysts have landed on a consensus price target of $48.1 a share for Wells Fargo, which implies the stock still needs to rise by as much as 17.5% from today's prices. There is some confidence in NII pushing on.

Moreover, thanks to the same market volatility pushing trading profits higher, the stock's compressed price has driven its dividend yield to an attractive 3.4% rate; looks like you don't need to be a lender to enjoy the benefits of today's market.

Moving into Citigroup, analysts see a similar net upside of 19.5%, even after today's rally of 3.6%. The continuation trend is gaining strength, as well as this bank's dividend, offering investors an attractive 4.9% yield today.

Lastly, with the giant JP Morgan, analysts decided not to shy away at all. With a 15.5% upside potential from today's prices, massive momentum is implied to push this tanker ship onward.

Generosity was extended into management's capital reasoning, as the stock currently offers investors a 2.8% yield, not the highest. Still, it can be excused because it is the bank with the fastest-growing NII and bottom line in this list.

What this says about the economy is, that despite tightening credit conditions and higher inflation, the overall population is still willing to spend and finance purchases. This means for investors to buckle up for a high VIX and seek out yield where you can.

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