NEW YORK (Real Money) -- You wonder why investors get confused? How about this? On Saturday people awoke to two lead stories in two different newspapers. The first, The Wall Street Journal, blares "Bank Earnings Worry Investors."
The New York Times
, says "Solid Results at 2 Banks Bode Well for Industry."
Which is right?
Let's continue for a paragraph to find out. The
Two of the nation's largest bans released first-quarter results on Friday that disappointed investors, underlining the industry's struggled with a sluggish economic recovery and the long hangover from the financial crisis.
Revenue is back. Hard hit by new regulations and a sluggish economy, banks have struggled to revive top-line performance since the financial crisis, even as profits improved. But two of the nation's largest lenders, JP Morgan Chase and Wells Fargo, reported strong revenue growth on Friday, a surprise that could bode well for the rest of the industry and the broader economy.
To me, the issue is pretty clear-cut: the
took its judgment from the horrid action in the stocks, not thinking that perhaps
stocks were bad on Friday. The
took its judgment from the facts, from how the companies really did, and didn't simply look at the share price and pronounce victory or defeat.
I spent the weekend going over the conference calls and the post notes for
, and I come away convinced that if we weren't worried about Europe, specifically the Spanish 10-year on Thursday, both bank stocks would have been higher. That's right, higher.
There was nothing in JPMorgan's report that was wrong except the fact that the government and regulatory agencies worldwide continue to hold a fairly tight rein over what the bank can do with its capital. You could argue that there was some line item that might not have been up to snuff, maybe a credit card gain here or a reserve for litigation there. In general, though, the bank is growing and stronger than it has been in years, certainly stronger than the last time it was here before going much lower.
Wells Fargo? Let me be clear about this: Wells had an amazing quarter. This quarter had excellent growth, declining loan losses, fantastic initial progress with the government's plan to help underwater homeowners and it managed to take out huge costs while growing beyond what anyone expected.
Plus, it is one of the rare beneficiaries of the European woes, having little actual exposure to any part of Europe but also having purchased a huge parcel of energy loans from
, with $9.5 billion in loan commitments.
didn't buy Wells' story at all, saying that loan growth appeared to slow. To me, I wonder ... were they on the same conference call as I was? This bank is doing so, so well, with 30% of the mortgage market, and one can only wonder if it is going to have a miraculous earnings resurgence as the year goes on.
I am not sure if many people realize how journalists are letting the stocks, not the fundamentals, determine the spin. Friday was a horrid day for banks because the banks reflected worries about Europe, even if they shouldn't. They are easy shorts because they can't be taken over and they don't have big enough yields yet to daunt the naysayers. But make no mistake about their revenue growth: It is back. And earnings are beginning to reflect not just cost-cutting but sales growth, too.
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, which Cramer co-manages as a charitable trust, is long JPMorgan.