Trader Talk

Bank earnings good enough, Dimon upbeat on economy

Pisani: Financials ok, but no boost from big industrials

The first wave of earnings reports has rolled in, and they are "good enough," with Bank of America, PNC and JPMorgan all beating on the bottom line, while Wells Fargo at 96 cents was a bit shy of the $1 consensus.

As expected, commentary on what the investment community really wanted to hear — 2017 guidance — was light. JPMorgan CEO Jamie Dimon did say, "The U.S. economy may be building momentum. Looking ahead, there is opportunity for good, rational and thoughtful policy decisions to be implemented, which would spur growth, create jobs for Americans across the income spectrum and help communities, and we are well positioned to play our part."

On the conference call, Dimon, when asked about signs of that "building momentum," characteristically downplayed forecasting, saying "we don't react that much to the weather." But he said he was basing his observation "on a broad range of things, and it looks like growth may have done a little better in the fourth quarter, plus if you take a walk around the world, Japan's doing a little bit better, Europe's doing a little bit better. ..."

As for the issue on everyone's mind — tax cuts and fewer regulations — Dimon said that regulatory relief may help banks open new branches and seek out clients they don't have "so I'm hoping you'll see a little bit of that." A lower tax rate would be "good for growth in the country in general."

The bottom line on the impact of lower taxes and less regulation: "You have to see the whole package before you can see what the net impact is, but ultimately ... it's good for our franchise broadly."

CFO Marianne Lake said the bank would provide details on 2017 guidance at its Investor Day, which is scheduled for Feb. 28.

Bank of America's CFO Paul Donofrio said, "While the recent rise in interest rates came too late to impact fourth-quarter results, we expect to see a significant increase in net interest income in the first quarter of 2017."

While they did not give guidance about how the combination of lower taxes and less regulations might impact earnings, Mr. Donofrio said they expected a similar tax rate of 31 percent for the average for 2017 excluding unusual items.