JP Morgan (JPM) saw another massive quarter in in its trading and investment banking divisions and a $5.2 billion credit reserve release contributed to $4.50 of earnings per share (vs. the $3.01 analyst estimate). Deposits continued to climb in the period, up more than 30% over the last 12 months to nearly $2.3 trillion by quarter-end.

Loan demand remains tepid, however, as corporate clients continue to opt for capital markets access for liquidity over drawing from bank loans. The loan book is conservatively positioned, with one of the highest CET1 ratios of its peer group and existing loans that remain well-reserved for credit losses.

JPM continues to operate at a very high level, producing 29% returns on average common equity and an efficiency ratio below 60%, while growing tangible book value per share by 10% year-over-year.

With the pandemic hopefully headed for the rear-view mirror, America’s largest bank is set up nicely to benefit from robust economic growth expected over the next few years.

JPM is a systemically important bank that is still growing its branch network and the company expects to have a presence in all lower 48 states by July. Shares trade at an attractive 12 times the consensus 2021 earnings estimate with a dividend yield of 2.4%. Our Target Price for JPM has been hiked to $176.

Shares of Goldman Sachs Group (GS) rose after the global investment firm turned in another blowout quarter. GS reported a top-line of $17.7 billion, which was more than 41% higher than expectations, and adjusted EPS of $18.60, more than 84% better than the consensus analyst estimate of $10.07.

Goldman posted record net revenue and EPS in Q1, highlighted by robust capital markets activity and profitability in the Investment Banking and Global Markets segments, and record quarterly net revenue in the Asset Management business.

Strong activity levels, a healthy balance sheet and sound strategic repositioning have us thinking that GS shares remain quite attractive for the long-term, especially given the fantastic results the company has been able to produce the last year, including $30.68 of adjusted EPS in the last two quarters.

We would not be surprised to continue to see strong earnings versus competitors because of the company’s lower interest-rate exposure.

The build out of its traditional banking and investment-management businesses should serve shareholders well in the long run, as almost two-thirds of Goldman’s revenue still comes from its investment banking and global markets trading business segments.

The ultimate goal of Goldman’s evolution is to change the trading and deal-making titan into a more well-rounded financial firm with more stable consumer and commercial businesses, which we believe continues to progress. That said, we realize that it may take some time for the efforts to begin to be truly rewarded by investors. Our Target Price for GS has been raised to $398.

Despite turning in an a sensational Q1, shares of Morgan Stanley (MS) fell as the company announced during its earnings release that it had suffered a $911 million loss as part of the Archegos family office debacle.

The announcement of the loss weighed on the stock more heavily than the enthusiasm stoked from the strong Q1 results as investors wondered if the company might need to spend to further revamp overall risk management.

For the quarter, MS managed to deliver adjusted EPS of $2.22, more than 31% greater than forecasts looking for $1.68. MS continued to show strength in Wealth Management and Investment Management, and Q1 also saw strong results in Investment Banking and Trading.

Concerning Archegos, more than two-thirds of Morgan Stanley’s losses resulted from collateral the bank sold at lower values after Archegos was unable to repay its margin loans.

We like the diversifying acquisition of Eaton Vance and we also believe the recently closed purchase of E-Trade gives MS greater scale in tech, a deeper product and service base, and self-directed investors to complement advisor-assisted wealth-management clients.

In the near-term, we believe MS will benefit from continued strong capital market activities and we see the opportunity to take larger wallet share in wealth management.

While financial stocks have done well recently, they continue to face headwinds in the low-interest-rate environment. Still, we are constructive on MS’s lower exposure to consumer and commercial loans, the healthy balance sheet and the relatively inexpensive valuation. Our Target Price has been lifted to $94.