JPMorganChase earnings show how far along it has come since the recovery, but there will continue to be challenges for the banking industry in the second-half, Anton Schutz, president of Mendon Capital, and Fred Cannon of Keefe, Bruyette & Woods, told CNBC in an interview.
Schutz told CNBC, “It shows us that the large banks have plenty of capital because they bought three-and-a-half billion dollars of their own stock back… I think the rest of the industry among the large caps is going to show some similar things.”
However, Cannon said he does not expect Citigroup to get the kind of numbers JPMorgan reported. He said Citi is making progress in dealing with the capital issues that they have in the past.
On the other hand, Schutz said he expects Citi earnings to surprise to the upside:
“We will see more progress in terms of shrinking their [Citigroup] balance sheet and I think we will maybe get a hint as to how soon they can start to return capital to us…I would like to see them over-deliver and I think there is a good chance that they will.”
Schutz added, “JPMorgan raised the bar...I think they can release more reserves.”
Shutz told CNBC that he believed JPMorgan earnings proved "the power of the combined entity and its powerful capital generation." He said that although JPMorgan missed on margin, it delivered on revenue.
“This is time to buy JPMorgan…You will see some buybacks… and I think you saw some lending happen in the commercial side of the business, you saw credit quality improving.”
Fred Cannon of Keefe, Bruyette & Woods said that the earnings results highlighted how far ahead JPMorgan is in its recovery compared to Bank of America .
Cannon added that JPMorgan is farther along than some of the other banks in terms of capital when compared to Citi and Bank of America.
Cannon said further, JPMorgan's numbers “seem to be more about market share than markets. They really are not going to cover up the ball in a number of areas and we don’t expect that to necessarily to spill over into some of the other banks.”
Yet, he adds, JPMorgan’s results in mortgage banking could be a positive indicator for Wells Fargo.
_____________________________
CNBC Data Pages:
______________________________
______________________________
Disclosures:
Anton Schutz does not own shares in the companies mentioned above.
Mendon Capital owns shares of JPM, C, BAC, FUBC, and CSFL.
Fred Cannon does not own shares in the companies mentioned above.
WFC, MS, GS, BAC, and JPM are investment banking clients of Keefe, Bruyette & Woods.