Jim Cramer, speaking to the Action Alerts PLUS monthly members call July 15, assessed the bank results to date.
“The money center banks reported yesterday. We learned that JPMorgan (JPM) - Get JPMorgan Chase & Co. (JPM) Report and Citigroup (C) - Get Citigroup Inc. Report reported really good quarters. Wells Fargo (WFC) - Get Wells Fargo & Company Report was a disaster. In good times we often take our cue from the best, which is JPMorgan. Instead we took our cue from the worst, Wells Fargo, which does not share the great trading of business that JP Morgan has, and doesn't have the international franchise that comes from the globe-trotting Citi.
"Now I have to tell you, when we do these calls, I do background talks with all the CEOs and with the top people. Why do I do that? Because I'm trying to prepare for my show and prepare for you in the club. And when I talk to the CEOs, I was kind of sanguine about all the quarters. I wasn't surprised by any of the numbers they reported. They were all pretty good.
"I was very surprised at the reaction to the stocks, though, especially to Citi, which I thought did a darn good job. I was surprised that only about 6% of its debtors took advantage of its offer for forgiveness. And then even when push came to shove, less than half of those, of the 6%, actually said they wanted to forbear. I thought that was extraordinarily bullish.
"I also haven't seen a major bank trade at such a discount to its tangible book, more than $20, and the book is clean because it was scrubbed by the government. And it's unbelievable. I was also conscious that when we first started selling Citi, it was very, very high. And what we were doing was selling into the buyback.
"But hence the real issue. The government won't let them do buybacks anymore, and the stock has gotten hammered, as has JPMorgan. And it doesn't seem to matter what the yield is. JPMorgan's quarter was absolutely terrific. I expected that the stock would pop three, four. It did. Then it gave up those gains. This morning it started doing well.
"Why? Because Goldman Sachs (GS) - Get Goldman Sachs Group, Inc. (GS) Report reported a great quarter, another one of our holdings. The stock was up $7. How could it not be? It was trading below book when I spoke to the team there and I used to work there. I was in awe. The numbers are just extraordinary. They did take, though, some loan losses. And I don't think people expected them to have reserves. And because they took reserves, the luster was diminished."