Bank Earnings Have Entered the Upside-Down

In this podcast, Motley Fool contributors Tyler Crowe, Lou Whiteman, and Matt Frankel discuss:

• The important numbers from the big bank earnings bonanza.
• Was Jamie Dimon "normal" cautious or "extra" cautious?
• Automating warehouses is harder than it sounds.
• Investing opportunities in robotics and automation.

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A full transcript is below.

This podcast was recorded on Oct. 13, 2026.

Tyler Crowe: It's Bizarro Bank Earnings Day. Motley Fool Hidden Gems Investing starts now. Welcome to Motley Fool Hidden Gems Investing. I’m your host, Tyler Crowe, today. I'm joined by longtime Fool contributors, Matt Frankel and Lou Whiteman. Guys, we're going to get into the challenge, I guess, if you will, of investing in the robotic space and automation. We’re going to hit the email, but we’re going to start today because it’s bank earnings week, and we had three of the biggest banks already kick us off. We had JPMorgan. We had Goldman Sachs, Wells Fargo, and Citibank all report earnings today. Guys, it was like that episode of Seinfeld, where they had Bizarro Jerry and the crew. Because whatever was up was down. JPMorgan actually missed estimates, but its stock was up, while everyone else beat earnings and saw their stocks go down. This is, of course, as we're recording. By the time this show drops, perhaps that's changed a little bit, but it did show a little bit of the reaction of what we saw today. Obviously, anything that happens at any given moment, we're not going to look into it too much. Looking across the whole space, I'm going to start with you, Lou, what is the one number from these big bank earnings that you saw so far that all investors should know about?

Lou Whiteman: 557. I know there's more important numbers, and we can get into more of it, but that is the single most important number. That's JPMorgan's reported earnings per share. It is, as you say, a miss. Wall Street was expecting 590. This is significant to me because JPMorgan is the bellwether. Jamie Dimon is the Oracle of Wall Street. When they miss, it deserves attention. Look, I think the drivers are interesting too, securities losses, slower investment banking. What we're seeing the story of this quarter, and we can get deeper into it is that banks with heavy trading models did well. The more diversified or rate-sensitive franchises, I don't want to say did poorly, but they're showing signs of strain, and I think that is my big takeaway based on that one number and everything else we got.

Tyler Crowe: I want to go in a slightly different direction just for a second, though, because we just came back from FoolFest, our annual live membership to get together, and our colleague, Emily Flippen, put out a rather stark number. I think it was something like 85% of companies in the prior quarter and second quarter beat earnings estimates. Is this baby Wall Street up the ante a little bit here, where it was like we can't have everybody beating that much, and so some of them might actually miss this quarter?

Lou Whiteman: Maybe. Maybe some, but look, I mean, again, JPMorgan is not they're a company that tries to communicate pretty well. You take away the net securities losses, and earnings per share was still below the estimate. Look, it's just it's not as easy as it was previously. That's the takeaway.

Tyler Crowe: Matt, same took you if you obviously, there's a whole bunch of other companies we can go into direction here. The one number you think matters the most?

Matt Frankel: Well, one of the biggest reasons I like following bank earnings, it's not necessarily just for the banks themselves. It's because you can get a lot of insight into the health of the consumer. It can have implications for literally every other sector of the market as we go through earning season. One number that really stood out to me is card spending. Credit card spending at these major banks was up 10% to 13%. Even after adjusting for inflation, you're looking at 6% to 9% real increase in spending. Consumers aren't pulling back, despite the uncertain economy. Consumer credit quality was strong. Net charge-off rates were lower pretty much across the board. All the bank CEO said that the consumer is healthy. They didn't say the same for business loans. That's where most of the reserve builds were. There were a few yellow flags throughout the industry. But generally speaking, consumers appear healthier and more than I would have thought.

Lou Whiteman: The consumer is fascinating right now because, you're right, Matt, it looks fine. But then, again, you hear all these stories about what is going on the credit card bills or what is going into credit right now, things like utility bills, things like that. I don't know how I read this through. The good news is that they're paying their bills, and that is what we need. All we need is a critical mass able to continue with business as usual. But I worry that the card numbers from an individual company don't adequately speak to the strain that the consumer collectively is under right now. That's still a wait-and-see.

Matt Frankel: Yeah, I mean, there is a caveat there. The big banks tend to skew toward more affluent consumers. You've heard a lot of talk in the media about having a K-shaped economy where the people at the top are doing better while the people at the bottom might be getting left behind. Like you said, the big four banks, generally, their core customer base are the affluent customers. You're right. It doesn't give us a full read on it, and just because people are spending a lot doesn't mean they're healthy. I know a lot of people who increase their credit card spending who shouldn't be. But you're right. It's not like a total read on the U.S. consumer, but it still surprised me that the spending increased quite so much.

Tyler Crowe: We'd be remiss. You said yellow flags, and we just don’t want to hand-wave that too much. Obviously, Jamie Dimon is known for being, I wouldn't say completely pessimistic on a lot of these calls, but he tends to be a little bit more cautious than I would say most companies in general. But then again, he's a banker. We want our bankers to be a little bit more on the cautious side. Was the commentary that you saw from Jamie Dimon or maybe somebody else in the most recent quarter slightly more bearish than normal, or was it just par for the course? Hey, let's look out here. There's some stuff going on.

Matt Frankel: Well, like you said, Jamie Dimon has given bearish commentary many times in recent years, and he gave a whole list of worries with this earnings report. He named large deficits, sticky inflation, elevated asset prices, rising interest rates, geopolitics, all his concerns. He called them manageable, but he said he's preparing for a wide range of outcomes. But it's not just what he said. Like you said, he's been bearish before. JPMorgan deliberately cut back its pace of share repurchases this quarter. They used that word deliberately, not just not like the Fed made them cut back repurchases or they didn't have the money. That indicates that they might feel like the stock's a little expensive compared to the opportunities in the medium term.

Lou Whiteman: Yeah. Maybe, or is that a signal that you want to keep your cash for a rainy day? It's so hard to say. But yeah, Diamond is always glass half empty. I think he sees that as his job. Charlie Shariff over at Wells Fargo probably tried to be the most reassuring, but also said that underwriting criteria assumes consumer credit will weaken at some point. There's even there, where there's optimism, there's a feeling of inevitability right now.

Tyler Crowe: One thing we've learned from JPMorgan and Jamie Dimon over the time is sometimes I like to keep a little bit extra cushion because eventually, something's going to go wrong and somebody's going to have to get bought for various reasons. JPMorgan always seems to be the bank of last resort when the FDIC needs somebody to get bought. I mean, I'm being a little flippant here when I say that, but it is something worth following up in the next couple of quarters. It's hard to take it. Any signal from one quarter of being like, let's be cautious, again, that's how these things always shake out. Coming up after the break, we're going to get into the complexities and the challenges a lot of companies implementing robotics and automation are facing.

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Tyler Crowe: We've always wanted to have some conversation around robotics and automation because from our listener mailbags and a lot of comments that we get, it tends to be a subject people want to learn the most about. Obviously, with AI, this rolling snowball, if you will, with more AI, better adoption of robotics, and we get this nice snowball effect here. But we really got a chance here because over the weekend, the Wall Street Journal did a great piece on Walmart and some of the challenges that it is having implementing automation for the various reasons, the complexities of trying to go from lifting a box full of diapers versus lifting a box that has a 70-inch TV and the weight differences, and all those challenges that they're having. It's a fascinating read.

Anybody who's interested in robotics and the nuts and bolts of how it worked, I think should go check it out. But, guys, one of the first things that stood out to me, and I'd like to get your thoughts on this as well, was they mentioned how these are old facilities and how Amazon seems to be beating a lot of these companies when it comes to automation because they're investing heavier, they have newer facilities. They can do a little bit more. My question is, is Amazon that much further ahead of the legacy retailers or do we just not have as much visibility into what they're doing? I don't know, not having high-profile Wall Street Journal articles written about their automation lately.

Lou Whiteman: Yes is the answer, I think. Amazon is definitely ahead. As you say, they got to start from scratch and they continue to build, so I think that helps. But look, they bought Kiva Systems back in 2012. That was their entry into robotics, which is well ahead of what most people are doing. The question is too, does it matter long term? Because even if you’re ahead, if everyone can get there, it’s a short-term advantage and not a moat, dare I say. But, yeah, I do think the signs indicate that Amazon is ahead, but yet we also haven't had a Wall Street Journal story really, really look in at all of the little I don't know, to stubs they have, as well.

Tyler Crowe: Yeah, Matt, do you agree with that?

Matt Frankel: Yeah, I mean, I honestly didn't need a Wall Street Journal story to tell me that Amazon had an edge when it comes to automation. Not only did they buy Kiva early, like Lou said, they designed many of their buildings specifically around automation, whereas, as you said, Walmart's trying to retrofit old buildings from the '80s and '90s that also have to keep running while they're under construction. I mean, for visibility, you're right. I mean, Amazon boasts about on its milestones, but it rarely will talk about its failures publicly. That's where you see data second or third hand.

Tyler Crowe: Yeah, and part of the discussion that I found so interesting too, on the complexities of it is we think of automation and robots as being able to handle everything. And one of the big stories coming out of this was a fully automated facility is something like 80% automated because getting that last 20% is so complex that it's just like it's easier to use humans because of the one off nature of these things, and it's just harder to train. Because of that, because of the very many unique tasks and things that we are doing in the automation space. There's been talk of humanoid robots doing a lot of this versus the automation arms, things like ABB makes. The things that we see on assembly lines that have been common in ecommerce warehouses, as well. My question is, as we’re watching this industry shape up over time, will robotics have that one winner to rule them all, as we’ve seen in Silicon Valley: Alphabet dominates search and YouTube, whereas Meta dominates social media. Is that going to be the same thing here because they have the most data, the most capabilities, or is do the unique needs, the bespoke nature of this. I mean that we can see a lot of good investments in this potentially.

Lou Whiteman: I think we'll see a lot of good investments because like I said, you hit the nail on the head right there. It's not a winner-take-all category. These companies have very different really goals. I mean, look, they're all trying to just automate and organize, but so many different kinds of products, so many different just is it B2B, B2C packaging requirements? Is it just distributions, get things on trucking, get them out to a store or get them out to consumers. There's just so many it's rare to find two companies that have identical supply chains throughout an identical fulfillment. It's hard to build a prepackaged solution. I think you're alREITy seeing it. I think some of the best investments are going to be just those who can contribute, whether it's Zebra or Honeywell with some of the stuff they're doing or Symbotic doing warehouse automation as a service all the way up to a GXO, which is going to do it for you because that's another variable here. Some companies want to control their warehouses. Some companies quite frankly don't. I do think there's a ton of opportunities. It might take longer than we hope because of the complexity, but I do think there is just a lot of work being done here, and there will be a lot of winners.

Tyler Crowe: To that point of the many different ways that it's getting deployed and expenditures that a lot of these companies are going at, Matt, one of the things I was thinking about as I was reading this too, is we're spending a lot on things like AI infrastructure right now. The amount of money that's going out the door is pretty spectacular. I'm curious, do you think that AI infrastructure spending could be like delaying the deployment of some of this automation and robotic spending? Just because there's only so much capital to be deployed in certain ways. Certainly, Amazon, for example, is spending a lot on capex for AI infrastructure. Automation may not be as much of a priority right now. It seems pretty clear a major robotics push is going to take similar levels of capital spending to what we've seen with AI, right?

Matt Frankel: Yeah, I mean, for tech giants like Amazon, AI is the clear priority. Amazon's capex guidance for this year is about $200 billion. I mean, another way to think of that is even if most of that is spent on AI infrastructure, it could still leave billions of dollars to invest in automation this year alone. For retailers, the automation is the priority. For me the bigger concern here is really the power angle. One of the things in the Wall Street Journal article you mentioned is that when Walmart automates one of its warehouses, its electric bills more than triple compared to what they were before they were automated. The Data Center infrastructure and warehouse automation, they both pull from the same energy grid. That could be the biggest delaying factor, in my opinion, not just the capex, because the retailers who really need this to work, this is going to be their capex priority. It's a question of power infrastructure for a lot of.

Tyler Crowe: Yeah, one of the small side notes on that that was so interesting was the temperature range for a Symbotic automated facility had to be much more temperature-controlled than human-run places. It was almost like one of those. Well, I guess HVAC companies win again. The picks and shovels always seem to be a great place to go. But on that, as we're wrapping up here, as you guys are thinking about investors going into the space, robotics automation, there's a lot of ways they can go. There's the pure plays like Symbotic. There's some of the industrial giants like we mentioned, ABB, Honeywell, and these companies. What to you guys, is the biggest takeaway for investors that are interested in this space. As a follow on, go ahead and throw out what you think is one of the best companies in this industry.

Lou Whiteman: Just a backup one step, what we're really talking about here is warehouse automation has been going on for decades. But what we’re doing is moving from those single-use arms, like you said, where basically you programmed it, and you ripped it out when you were done with it, to multi-use. That is the opportunity now with AI, just smart systems that can be reprogrammed and do multiple tasks and therefore do more tasks. That is the opportunity. It's going to take a lot longer than it looks on the PowerPoint. I think that's what the Walmart article tells us is, it is hard to retrofit in real time. But there is the opportunity there. You mentioned it Symbotic is, I think, a very, very intriguing company in all this. It still looks overvalued versus today's business, but there's so much potential in that business. That's one I'd look at. Also, I love GXO as a different way to go about this. But again, I think this is going to be maybe as big as AI. We're approaching that in terms of just the breadth of companies, even if not the pure revenue numbers.

Matt Frankel: Yeah. I mean, I think there are going to be years of heavy spending and some setbacks along the way before we get a big payoff from automating warehouses. I'd bet on the companies that can comfortably afford to get through this period. Walmart actually might be one of my favorite ways to invest in the automation trend if I had the name of stock. I mean, Lou mentioned Symbotic. That's an obvious play. But yeah, some of the retailers that have the strongest balance sheets are in the best position to win here.

Tyler Crowe: Well, it probably is worth mentioning that Walmart does have a pretty considerable stake in some Symbotic, so nice little synergies with that one. Coming up after the break, Matt, you've got a question specifically for you in the mailbag. Hey, everyone, just a quick reminder, if you want to get your email read on air, go ahead and email us at podcast at fool.com. That's podcast with an S. I've also put the email in the show description, so you can grab it there as well. Today's email comes from Matt Hoffman, and this one is specifically from Matt Frankel. He says, you have owned Empire State Real Teach Trust, the ticker is ESRT, as I have. It would be an understatement to say that performance has been terrible. What has been the main cause of the poor results, and when you rate it to buy hold or sell at its current price? Let's start with just the first half of it. It's been bad. Why has it been bad?

Matt Frankel: Yeah. Well, first of all, this is the Real Estate Investment Trust that owns the Empire State Building in a portfolio of mostly office properties in New York City. They have a few residential properties, mostly offices. The short answer is that the key differentiator of this compared to other office REITs is the observatory on top of the Empire State Building. They don't lease that out. They own that, and they make money from it. General decline in international tourism has hit the observatory hard. There's also increased competition. There's a few new observatories high buildings that have opened in the past couple of years. Observatory revenue was down almost 30% in the last quarter, and net operating income was cut almost in half. This is their big profit center. This is the highest margin part of their business.

The ironic part is the office business is fine. When I bought, my thesis was the opposite. My thesis was that the office market could remain weak because of hybrid and remote work, but that the observatory, which they just invested a lot of money in would provide high margin cash flow and give it an advantage over other office REITs. The office portfolio is almost 95% at least. That's up from about 93% a year ago. The company is they've achieved higher lease rates on new leases for 20 quarters in a row. Of course, there's the interest rate factor. If you look at pretty much any REIT, they've been an underperformer late.

Tyler Crowe: It's that's been pretty par for the course for much of the industry between interest rates and the struggles with debt and all that stuff. I do want to put the rubber to the road here because we want to go buy sell or hold, and, Lou, you can give your thoughts as well here. Giving this last minute thing, and we can keep it really short, buy sell or hold Empire State Realty Trust at today's prices.

Matt Frankel: Yeah, I'm holding. We're not giving personal advice, but I'm holding, at least for now. The stock trades for six times funds from operations, which is real estate version of earnings. Even after adjusting for the observatory expectations, it's still very profitable. No debt maturities till 2028. It's a cyclical problem that comes with international tourism. There are some yellow flags, high debt ratio, Debt-to-EBITDA 6.6. That's a pretty high ratio for rate, and management has specifically said it is a limited visibility into future observatory revenue. I'll be watching that as we go forward, but I'm holding for right now.

Lou Whiteman: Now, I'll be honest. It's hard for me to find this compelling. Its stock is down 50% in the last year. If this is how the stock reacts when, in Matt’s words, the core office business is fine, it’s tough for me to see this as a long-term, consistent market beater. Dividend yield under three. You need a lot of growth. I'll pass.

Tyler Crowe: It's going to be a challenging market for anybody in the real estate space, especially with the rising interest rates. But hey, some of them will work. Some of them might not. That's all the time we have for today.

As always, people on the program may have interest in the stocks they talk about and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks, they sell when you hear. All personal finance content follows Motley Fool editorial standards, and it's not approved by advertising. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. Thanks for producer Bart Shannon and the rest of The Motley Fool team. For Matt, Lou, and myself, thanks for listening, and we'll chat again soon.

Wells Fargo is an advertising partner of Motley Fool Money. Citigroup is an advertising partner of Motley Fool Money. JPMorgan Chase is an advertising partner of Motley Fool Money. Lou Whiteman has positions in GXO Logistics, Honeywell Technologies, Symbotic, and Walmart. Matt Frankel, CFP® has positions in Amazon and Empire State Realty Trust. Tyler Crowe has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Abb, Alphabet, Amazon, Goldman Sachs Group, Honeywell Technologies, JPMorgan Chase, Meta Platforms, Symbotic, Walmart, and Zebra Technologies. The Motley Fool recommends Empire State Realty Trust and GXO Logistics. The Motley Fool has a disclosure policy.