JPMorgan Chase & Co (NYSE: JPM) and Goldman Sachs Group Inc (NYSE: GS) officially kicked off the earnings season for the Wall Street banks on Tuesday, both reporting market-beating results for the second quarter. Shares of the two companies, however, remained under pressure as investors were left unimpressed by the loan growth in the recent quarter.
The U.S. stock markets were also weighed on Tuesday as the U.S. Labour Department reported a 0.9% increase in consumer prices last month and 5.4% annually – the hottest inflation reading since August 2008.
Stephan Biggar’s comments on CNBC’s “Squawk on the Street”
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Stephan Biggar of Argus Research, however, is confident that the recent underperformance of banks relative to the broader markets could reverse in the third quarter. On CNBC’s “Squawk on the Street”, Biggar said:
“When you get a pullback like this, I think it’s a good buying opportunity. We may have a little pause in performance at this point until we get a clear outlook. We’ll see if the comments from banks’ management on loan growth and the interest rate environment turns into a tailwind in the second half. But I think the direction of rates is higher; that’s beneficial for banks.”
Biggar expects the ongoing recovery in travel demand to fuel loan growth in the second half. In his interview with CNBC, he also highlighted that capital markets had sustained strength much longer than expected. And considering that “the pipelines look pretty decent”, it is likely to continue in the back half of fiscal 2021.
Anton Schutz on why there’s no loan growth right now
In related news, Mendon Capital’s Anton Schutz said on CNBC’s “The Exchange” that bank earnings estimates will rise as the year progresses.
“The reality is that the banks delivered. You can say this and that about both companies, but at the end of the day, they’re generating capital, generating book value; there’s no loan growth right now because there’s a liquidity flood in the market which means excellent credit quality. A strong economy will eventually lead to loan demand,” he added.
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