Jim Cramer says 'all banks are not created equal,' and these are his favorites

CNBC’s Jim Cramer on Thursday reviewed the recent slate of major bank earnings and explained why his charitable investment trust is sticking with its ownership of Morgan Stanley and Wells Fargo.

“The banks are all over the place this earnings season, which just goes to show the importance of individual stock picking,” the “Mad Money” host said. “All banks are not created equal,” he added, even though he expects 2022 to be a solid year for the financials overall because of likely interest rate hikes by the Federal Reserve.

When Citigroup reported Friday, it indicated an 18% year-over-year increase in operating expenses. That was disappointing to Wall Street, Cramer said, because the firm’s revenues only increased by 1%.

Cramer said the best thing he can say about Citi’s stock is that its cheap, trading at roughly 80% of its tangible book value. However, he acknowledged that the stock, which is down nearly 5% in the past week, may see a lift this quarter when Citi resumes share repurchases; the bank paused its buyback program in December due to regulatory issues.

Investors also were disappointed by JPMorgan’s jump in noninterest expenses, which rose 11% year over year, Cramer said. While it’s no secret JPMorgan is investing in its business to fend off fintech competition, Cramer said the Street was a bit surprised by the magnitude of the capital commitment.

Cramer said he thinks the sharp sell-off in JPMorgan’s stock post-earnings has been a bit overblown. “After this decline, JPMorgan trades at just 13 times earnings, although it’s the most expensive in the group on [a book value basis]. I think you can do better,” he said.

Owned by Cramer’s charitable trust, Wells Fargo beat analyst expectations on the top and bottom lines. “Most important, Wells is very sensitive to interest rates, so when you see bond yields surging, think Wells Fargo,” said Cramer, adding that the bank’s turnaround under CEO Charlie Scharf is “finally paying off.”

Cramer repeated his positive outlook on Goldman Sachs, explaining he believes the investment banking giant can follow up its record 2021 with another strong performance this year. “Goldman’s one of the best franchises on earth but it sells for less than 9 times earnings for heaven’s sake,” he said.

He said the only reason his charitable trust doesn’t own Goldman Sachs is because it already owns Morgan Stanley. “I’m a big believer in diversification — don’t need to have two investment banks in your portfolio,” he said.

Cramer said he was very impressed by Morgan Stanley’s quarterly numbers Wednesday, noting that revenue and per-share earnings topped the Street’s expectations. Its investment banking unit, as well as wealth management, are performing well, Cramer said, and expenses are remaining under control.

“Oh, and they’re aggressively buying back stock. What’s not to like?” Cramer asked rhetorically.

Cramer said Bank of America, which also reported Wednesday, delivered solid numbers, including the fact that revenue growth of 10% outpaced expense growth of 6%.

“Like Wells Fargo, Bank of America is highly sensitive to interest rates, which means it’s in a great position for 2022,” Cramer said, adding that the sole reason his charitable trust does not own Bank of America is because he likes Wells Fargo better.

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