Jim Cramer recaps 4 major banks’ earnings reports

CNBC’s Jim Cramer on Friday offered investors his thoughts on the major banks that reported earnings this week.

“If the whole market hadn’t already roared yesterday, I think we could’ve had a nice rally in response to these numbers. But, as it is, I’d say this is a surprisingly solid start to earnings season,” he said.

JPMorgan Chase, Morgan Stanley, Wells Fargo and Citigroup reported their latest quarterly results on Friday. Here is Cramer’s take on each of the banks’ latest quarters:

JPMorgan Chase beat Wall Street expectations for its top and bottom line, aided by the Federal Reserve’s interest rate hikes. Cramer said he was surprised that the bank had a solid quarter since CEO Jamie Dimon warned that the U.S. economy would likely enter a recession in the middle of next year. 

However, Cramer said he still expected the bank to see a boost from rising rates.

“The banks make a fortune when the Federal Reserve raises interest rates, because they can take your deposits, which they pay next to nothing for, and then invest them in short-term Treasurys to get a much higher risk-free return,” he explained.

The bank beat on earnings and revenue in its latest quarter but saw a cut to its bottom line from its decision to boost its loan loss reserves. 

Cramer said he likes the stock because the company has more interest rate exposure than most of its peers, which makes it attractive during a high-interest rate environment. And while a risk of higher rates is that people could lose their jobs and have to default on their obligations, resulting in a higher percentage of bad loans, Wells Fargo’s strength in its net interest income is more than enough to offset the damage from bad loans, according to Cramer.

“I remain a believer here — management’s executing incredibly well — I think the story only gets better as rates go higher,” he said. “Buy Wells Fargo.”

Cramer said that he believes the market overreacted to Morgan Stanley’s third-quarter earnings and revenue miss. Shares of the bank fell 5%.

While he acknowledged that the quarter was rough, Cramer maintained that he believes the stock is a buy, highlighting the company’s generous dividend and stock buyback.

“I think Morgan Stanley can eventually thrive once the markets even out, but until then, you’ve got to be patient in this one,” he said.

Cramer said that he’d rather own the other banks than Citi, which beat on revenue and earnings in its latest quarter but saw a 25% decline in profits. Shares of the company rose 0.65%.

“We’ve seen Citi rally in response to earnings a number of times. … And then you know what happened? The gains quickly faded and the stock came right back down,” he said.

Disclaimer: Cramer’s Charitable Trust owns shares of Morgan Stanley and Wells Fargo.