FORTUNE -- Here's a switch: The bankers are all of a sudden doing worse than the butchers, the bakers, and the candlestick makers.
On Wednesday, Bank of America (BAC) announced that it had lost nearly $300 million in the first quarter. Analysts were expecting the bank to turn a profit. A year ago, it earned $1.5 billion. Meanwhile, profits at meat company Tyson Foods (TSN) are predicted to have jumped 130% in the first three months of the year. The bottom line at The Cheesecake Factory (CAKE) likely rose as well. Jarden (JAH), which bought Yankee Candle Co. last year, made $19 million in the first quarter. Last year, it lost a little over $4 million.
One of the themes of the recent recovery has been how Wall Street and banks in general have done much better in the rebound than the rest of us. A big justification for the financial crisis bailouts was that the banks were going to lead us out of the recession. Instead, they just seemed to go ahead on their own.
Last year, stocks rose 30%, even as the economy continued to disappoint. When the Dow Jones industrial average (INDU) hit an all-time high in the middle of the year, many quipped that the well-known stock average was meaningless. The split led many to point out the growing difference between the real economy and the money economy, though it's probably true that the two were more linked than people suggested.
Now, though, the real economy appears to be catching up, and perhaps taking the lead. Stocks have barely budged this year. And bank earnings, battered by a drop in mortgage refinance activity and a flat stock market, have mostly been a bust. What's more, higher interest rates, which could make borrowers more reluctant to take out loans, could crimp bank profits for the foreseeable future.
Along with Bank of America, JPMorgan Chase (JPM) missed earnings estimates, and its bottom line was down 20% from a year ago. Profits at U.S. Bancorp (USB) also fell 2% in the first quarter. On Thursday, Goldman Sachs (GS) reported earnings that were better than expected, but still down 5% from a year ago.
Earnings in the first quarter were lackluster in general. But banks have come out the worst, with bottom lines dropping nearly 14%. That's far worse than an average earnings drop of less than 1% for all the non-financial companies in the S&P 500 (SPX).
"It wasn't an encouraging quarter if you're looking for evidence that the economy is picking up," Raymond James bank analyst Anthony Polini told CNNMoney.com.
And yet, elsewhere, there seems to be plenty of evidence that the real economy is improving. Employers added nearly 200,000 new workers to their payrolls in both February and March. Earlier this week, industrial production numbers were better than expected, and retail sales were up. "It's clear that the economy is picking up steam," says Paul Ashworth, the chief U.S. economist for Capital Economics.
While news that industries outside of finance are doing better than banks and bankers may seem like a reason to celebrate for some, it may not be all that much to cheer about in the end. Some have argued that the recovery has been slow because the needed resources to repair the banking sector have sucked money out of the rest of the economy. The idea is that banks facing stricter rules and greater scrutiny have become hoarders. But now that we are seeing improvements beyond the banks and Wall Street, the hope is that the benefits of the economic recovery will be more widely shared.
But that can only go so far. The real economy needs the money economy to continue to do better, and vice versa. In fact, some suggest what we are seeing now has very little to do with the health of the real economy. "The money economy is falling back, but I don't think that means the real economy is doing better," says market strategist James Bianco. "The numbers we're getting are still pretty consistent with a crappy economy."
The only thing more surprising than Mike Cavanagh's decision to leave J.P. Morgan for The Carlyle Group may be his new compensation package.
FORTUNE -- Last week, Mike Cavanagh was considered the heir apparent to JPMorgan Chase & Co. (JPM) CEO Jamie Dimon. Then this past Tuesday he became the latest high-profile banker to shun Wall Street for the world of private equity, agreeing to join The Carlyle Group (CG) as co-president.
What we didn't realize MOREDan Primack - Mar 28, 2014 4:32 PM ET
Ares Capital Corp. hires a pair of direct lending pros away from Madison Capital Funding.
FORTUNE -- Alternative investment management firm Ares Capital Corp. (ARCC) has hired Grant Haggard and Brian Moncrief as managing directors in its direct lending business, Fortune has learned. Both men will be based in Chicago and previously were with Madison Capital Funding, the mid-market lending subsidiary of New York Life Investment Management.
Haggard had been with Madison Capital Funding for six MOREDan Primack - Mar 26, 2014 4:24 PM ET
Few of J.P. Morgan's 'survivors' are still with the bank.
FORTUNE -- In the midst of the financial crisis, we here at Fortune published a cover story about how Jamie Dimon and his team at J.P. Morgan (JPM) seemed to be weathering the credit crisis storm. We called them "The Survivors," writing about how "Dimon relies on a trusted team of talented lieutenants who share his zeal for sifting piles of data to MOREDan Primack - Mar 25, 2014 12:42 PM ET
Mike Cavanagh is no longer next in line at JPMorgan, after leaving to join The Carlyle Group. Don't be so surprised.
FORTUNE -- Private equity firm The Carlyle Group (CG) stunned Wall Street this morning, by announcing that it had poached Michael Cavanagh, the man many believed to be Jamie Dimon's heir apparent at JPMorgan Chase & Co. (JPM).
Cavanagh will serve as co-president at Carlyle, a newly-created role he will share with Carlyle's MOREDan Primack - Mar 25, 2014 11:20 AM ET
Jamie Dimon, once an advocate for building even larger banks, plans to exit some businesses and scale back others.
FORTUNE -- The nation's largest bank may indeed be too big.
On Tuesday, at its annual investor day, JPMorgan Chase executives spent a lot of time talking about the bank's plans to shrink.
"Bad loans equal bad revenue," said CEO Jamie Dimon. "Do a lot of bad loans and you go out of business. MOREStephen Gandel, senior editor - Feb 26, 2014 9:07 AM ET
A rule meant to limit bank trading would have also banned a risky complicated type of debt. What's so bad about that?Stephen Gandel, senior editor - Jan 6, 2014 1:19 PM ET
The Wells Fargo wagon is pulling into profit town. It won't stay for long, though.Stephen Gandel, senior editor - Nov 1, 2013 12:43 PM ET
Turns out that TARP funds weren't meant to finance luxury vacation homes.
FORTUNE -- No matter how one might feel about the 2009 bank bailouts, there is one thing I think we can all agree on: Bank executives shouldn't have used TARP money to buy themselves luxury vacation condos.
But that's exactly what Missouri banker Darryl Layne Woods has admitted to having done.
Woods today plead guilty in federal court to having lied to MOREDan Primack - Aug 27, 2013 3:53 PM ET
The Federal Reserve sheds some light on why Goldman and JPMorgan got a conditional pass on this year's stress tests, but the 41-page report is overkill.
FORTUNE -- The Federal Reserve won't rest until the nation's biggest banks are 100% safe, which means, basically, the Fed won't rest.
On Monday, the Fed released a report assessing how well the banks have done in the past year or so planning for another financial MOREStephen Gandel, senior editor - Aug 20, 2013 5:00 AM ET
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