Jim Cramer has observed that investors continue to punish bank stocks even when they report earnings above expectations. For instance, Morgan Stanley (MS) declined nearly 3% on Wednesday despite a 12% revenue increase, which surpassed forecasts. Cramer attributes the sell-off to concerns about persistent inflation and rising interest rates rather than weak financial performance. Similarly, Goldman Sachs, which also exceeded earnings estimates, saw its stock drop another 1.5% on the same day, according to CNBC.
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Morgan Stanley's third-quarter revenue rose to $20.3 billion from $18.2 billion a year earlier. However, the stock failed to gain traction. The Institutional Securities division, which combines investment banking and trading, saw an 18% increase to $10 billion. Cramer pointed out that fixed income results disappointed, reporting a 7% decline, while wealth management revenue increased by 10%, with client assets in this sector reaching a record $10.5 trillion. Company CEO Ted Pick expressed cautious optimism about the fourth quarter, as noted by Cramer.
Cramer, the host of CNBC's Mad Money, remarked, "it's not easy to own these bank stocks right now." He also highlighted Morgan Stanley's role as a lead underwriter for Anthropic's upcoming IPO, expected in November. Analyst Herman Chan from Bloomberg Intelligence suggested that this IPO could provide a boost for both Morgan Stanley and Goldman Sachs.
Cramer believes that a resolution to the conflict in Iran, even an imperfect one, could alleviate inflation pressures, potentially allowing the Federal Reserve to ease its rate hikes. This, he speculated, might lead to a recovery in capital markets. Additionally, he noted that his Charitable Trust portfolio recently upgraded Wells Fargo and Goldman Sachs to buy-equivalent ratings, emphasizing that these banks are no longer trading as a single entity due to their differing characteristics.
Momei Qu, head of venture at PSP Growth, commented that although Goldman Sachs and JPMorgan are increasingly being viewed as AI stocks, their earnings have yet to reflect this trend. This suggests that bank shares may continue to respond more to inflation and interest rate signals than to quarterly earnings performances.