Hurricane Milton disrupted activity across Florida including last week’s note. High winds and rain were destructive to many areas including Vero Beach. Work is still underway to repair damaged utilities and infrastructure. As this progresses internet and other telecommunication channels are slowly returning to their pre-storm reliability levels.
The first full week of bank earnings releases found 70% of reporting banks beat consensus Earnings per Share expectations by a median 6.3%. Sequential median EPS is growing for a 2nd consecutive quarter following 5 quarters of contraction. Year over year EPS growth is likely for the first quarter since March 2023. While this is good news, consensus revisions to 2025 estimates for the mid-cap bank group have so far been muted with a slight downward bias. Current 2025 median EPS growth for the group is estimated at 7.3%.
The full summary of key metrics from the early reports includes EPS growth from July of 2%. Median Net Interest Income and Net Interest Margin are both expanding sequentially for the 2nd consecutive quarter. Loan growth is very muted. Provision levels are falling fueling much of the EPS beat. However, Non-performing Assets are on the rise. Median NPA/A is increasing 5.9% from June and 32.5% from a year ago. Despite the rise in NPA levels and lower Provision expense, net charge offs remain minimal allowing for Reserve coverage and Capital ratios to improve.
From the earnings report calls, I have selected a passage from JPM CEO Jamie Dimon that captures much of the sentiment I have about asset values in the current environment. Dimon noted (my emphasis),
“If you look at it roughly, we have at a minimum $30 billion of excess capital. And for me, it’s not burning a hole in my pocket. I look at it as you own a whole company, and you can’t properly deploy it now, it’s perfectly reasonable to wait. And I’ve been quite clear that I think things — or the future could be quite turbulent. And asset prices, in my view, and you — and like you’ve got to take a view sometimes, are inflated. I don’t know if they’re extremely inflated or a little bit, but I’d prefer to wait. We will be able to deploy it. Our shareholders will be very well served by this waiting.
And the same thing with deploying capital. We can buy — we could all buy $100 billion of 6% mortgages, increase our net income by a couple of billion tomorrow. We don’t make decisions like that. The most important thing we do is serve our clients well, build a technology, and do things like that.
And we also don’t know — what the real excess capital is yet. So we’re a little patient. We’re going to be a little patient and wait, and it will be fine. And so that’s where we are, and that’s not going to change. And if it changes, we’ll let you know.
And we do talk to a lot of shareholders, and they understand that buying stock back at more than 2x tangible book value is not necessarily the best thing to do because we — people have better opportunities to redeploy it or to buy back at cheaper prices at one point. Markets do not stay high forever. Okay. I have one last thing. Cash is a very valuable asset sometimes in a turbulent world. And you see my friend Warren Buffett stockpiling cash right now. I mean, people should be a little more thoughtful about how we’re trying to navigate in this world and grow for the long term for our company.â€