🏦 Earnings from Goldman, Citi, and Bank of America

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Today's big stories

Goldman Sachs, Bank of America, and Citigroup reported mixed first-quarter results
One major investment bank released a report setting out the stocks it expects to bounce on earnings day – Read Now
Major airlines’ stocks rose after the companies reached an agreement with the US government to receive coronavirus support

1/3

Fancy Banks

What’s Going On Here?

Investors did a double-take as Bank of America (BoA), Goldman Sachs, and Citigroup all got dolled up to show off their first-quarter results on Wednesday.

What Does This Mean?

Investors responded to last quarter’s interest rate cuts and rising volatility by rejigging and rebalancing their portfolios, and all three banks were only too happy to accept their trading commissions, which gave that part of their business an expectation-busting boost. BoA and Goldman looked alike in another part of their business too: they both earned more than expected from advising companies on deals and fundraising last quarter – even as corporate clients focused more on battling a once-in-a-generation pandemic than on taking bankers’ advice.

Why Should I Care?

For markets: Investment versus consumer banking.
Unlike investment banks JPMorgan and Goldman Sachs – which rely on their trading and dealmaking segments for a lot of their income – BoA and Citigroup’s consumer businesses (think savings and loans) are a big part of both firms. That’s why it was notable to investors that BoA’s consumer business missed expectations. And with low rates and rising unemployment right now, things are probably going to get tougher for BoA, Citigroup, and similarly consumer-focused banking rivals.

The bigger picture: Preparing for the worst, hoping for the best.
In anticipation of the tough period ahead, banks ramped up the cash they put aside in case of unpaid loans last quarter. BoA, for example, put $4 billion aside against potential defaults on its credit cards, personal loans, and business loans, while Citigroup – the world’s largest credit card provider – put $5 billion aside on top of the $2 billion hit the bank took from unpaid debts over the period. And it’ll probably need even more than that: credit card bills tend to be one of the first things people stop repaying when they’re struggling financially (tweet this). Goldman might be glad its consumer business is comparatively new: the bank only put $1 billion aside.

Take action: How to safeguard your finances from missed repayments.

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2/3 Premium

It's An Earnings Day Miracle

A report from Goldman Sachs this week revealed which companies it’s expecting to beat market expectations when they release their results – including a few surprises.

Get the full story in the Finimize app

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3/3

Holding Patterns

What’s Going On Here?

The US government agreed to give US airlines a $25 billion support package this week, in hopes it’d keep them aloft until their runways are cleared of coronavirus-shaped obstacles.

What Does This Mean?

American Airlines will get just shy of $6 billion in US government support, while rival Delta Air Lines will receive $5 billion. The idea is that the cash – together with their own cost cuts – will see them through and help protect their employees till around September, by which time airlines are hoping the current travel halt will have been lifted.

The government’s help does come with strings attached, mind you. For one, major airlines will have to repay some of the cash – though admittedly with a low interest rate. For another, the government will take “warrants” in the airlines – which means it’s going to benefit from future rises in their share prices for a while.

Why Should I Care?

For markets: In for a penny, in for a pound.
Airline companies’ shares climbed early on Wednesday: American Airlines’ initially by 10%, and Delta’s and Southwest’s by 7% apiece. Investors might’ve fancied their stocks for a couple of reasons. First, the aid agreement has now made the immediate future of those airlines slightly more certain. And second, now that the US government effectively has a stake in several airlines, it might be more willing to offer extra support to the industry if coronavirus disruptions last longer than everyone expects.

The bigger picture: A global opportunity.
Airlines elsewhere in the world haven’t been quite so fortunate. Not yet, at least: the French government said it’d help support Air France-KLM in the next few days. Depending on the terms, of course, the potential announcement could give the national carrier’s stock a boost. Norwegian Air’s plan to convert its debt into company shares, meanwhile, might keep it from crashing like the near-bankrupt South African Airlines.

Explained: How low oil prices affect airline profits.

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💬 Quote of the day

“Enduring tedium over real time in a confined space is what real courage is. Such endurance is, as it happens, the distillate of what is, today, in this world neither you nor I have made, heroism. Heroism.”

– David Foster Wallace (an American author of novels, short stories, and essays)

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🤔 Q&A · RE: Living Hedgend

“Where are governments getting the money to provide so much economic stimulus from?”

– Winnie in Toronto, Canada

“Government spending is partly financed by revenues (i.e. taxes) and partly by selling bonds to investors both at home and abroad: China, for instance, is one of the largest investors in the US’s debt. Central banks can also help fund government spending via ‘helicopter money’. Just look at the UK, whose central bank has allowed the government to effectively tap into an overdraft from which it can draw new cash ‘created by’ the Bank of England.”

🙋 Ask a question

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🌎 Finimize Community

✈️ Around the world in eight events

Some of our events are country-specific, sure, but who are we to stop you from waking up in India, popping over to Russia for lunch, and finishing up Stateside? Might be best not to double-check that time zone math, but you get the gist. Sign up below 👇

🇬🇧 Finimize HQ: Global Economic Implications of COVID-19 with Anna Stupnytska – 1pm UK time, April 16th
🇮🇳 India: The Indian Macroeconomy with Achala Jethmalani – 7pm IST, April 16th
🌍 Finimize Workshop: How to Organize Your Own Finimize Virtual Event – 1pm UK Time, April 17th
🌍 Global: Aviation & Automobiles – 6pm UK Time, April 22nd
🇦🇺 Australia: Investing During A Pandemic – 7.30pm AEST, April 22nd
🇷🇺 Russia: Personal Finance in a Crisis – 2pm EET, April 23rd
🇺🇸 USA: Understanding the Impact of COVID-19 – 6pm PDT, April 23rd
🇭🇰 Hong Kong: COVID-Proof Your Portfolio with Stephen Chiu – 9pm HKT, April 28th

⚡️ Lightning insights

After last month’s market selloff, investor expectations of the economic damage of coronavirus have already largely been “priced in” to the markets.

We’ll talk about that a lot as we head into earnings season. So what exactly does it mean, and why does it matter? You can find out in our News and Markets Pack.

📚 What we're reading

How to give your sleep a spring clean (Inc.)
Toss the ol’ bread bouquet (My Modern Met)
When things look bleak, buy a ghost town (AV Club)

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🏦 Earnings from Goldman, Citi, and Bank of America

Today's big stories

Fancy Banks

What’s Going On Here?

What Does This Mean?

Why Should I Care?

It's An Earnings Day Miracle

👜 Stay-at-home style inspiration

Holding Patterns

What’s Going On Here?

What Does This Mean?

Why Should I Care?

💎 Live a life of luxury

✈️ Around the world in eight events

Older messages

🤕 JPMorgan beat the virus

🇺🇸 US jobs get worse and worse

💰 Airbnb's 1 billion richer

☠️ Dividends are doomed

📉 Stocks break records

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