By Scott Hallermann.

Day 1 in bank earnings releases brought an uneven market reaction. JPM and C popped higher, WFC
and PNC were flat and WAFD closed at a new cycle low. The question over the next few weeks is how
much of the big banks operational gains are at the expense of the regional and community banks?
The very small sample set trends include higher Net Interest Income, higher Net Interest Margin and
lower AOCI. Provision expense and Non-performing assets are roughly flat from the December quarter.
Net deposit balances, net loan balances and EPS are mixed on a sequential comparison. Tangible book
value increased low single digits.
For me key elements of the outlook remain for U.S. recession over the next 12 months. JPM is using a
weighted average unemployment peak of 5.8%. In real people implications a rise in the unemployment
rate from 3.5% to 5.8% equates to roughly 4 million more people out of work for a total unemployed
population of almost 10 million.
From the early commentary I found confirmation to my bias in the JPM call. In answer to a question
about potential “bank contagion†which seems to be reflected in equity prices, JPM CEO Dimon
responded (my emphasis), “the number of banks off-sides, you can count on your hands in terms of like
too much interest rate exposure, too much ATM, too much uninsured deposits. And so there may be
additional bank deposits — I mean, bank failure, something like that, which we don’t know. But you’re
going to see next week, regional banks have pretty good numbers. A lot of people are going to have —
can take actions to remediate some of the issues they may have going forward.

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