This story is brought to you by The Daily Upside. For more crisp and insightful content, you can sign up for the free Daily Upside newsletter here.
Fourth quarter earnings season kicked off in earnest last week, and soon one of the most tumultuous years in financial markets history will be fully in the books.
Some of America’s largest banks set the tone on Friday with results befitting of 2020: equal parts optimism and existential worry.
The Early Reports
Buoyed by a reversal of loan loss reserves, Wells Fargo and Citigroup each bested earnings expectations.
Then there was JPMorgan. The bank revealed it turned a record $12.1 billion profit in Q4 and many analysts were swooning over the numbers. Colorful analyst Jim Cramer called it “one of the greatest quarters I have ever seen.”
- Prime Strength: The majority of JPMorgan’s customers are what they call “prime” borrowers who have, according to CEO Jamie Dimon, “a lot more income” than an average bank customer. Dimon noted these customers continued to pay down their credit card balances at an “extraordinary” pace.
- JPMorgan reported a 20% increase in trading revenues, meaning it successfully captured the volatility you may have seen in your brokerage account.
Still, investors were turned off by tepid loan growth and a still cautious outlook from Dimon, sending shares down nearly 2% on the day.
Responding to a question from an analyst, Jamie Dimon expressed concern about the growth of competition from emerging fintech players.
Making note of Visa, PayPal, Ant Financial, Tencent, Facebook, Google, Apple and Amazon, Dimon acknowledged there is a long list of talented companies he is “scared ****** of". Exact quote.
The Takeaway: There is good reason to be worried. Square, founded just over a decade ago, now has a market cap on par with that of Goldman Sachs.