Big Bank Buys- JPMorgan, Goldman Sachs And Morgan Stanley

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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.

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