Big Banks kick off third-quarter earnings season. JPMorgan (JPM) reported quarterly results that showed a surprise increase in net interest income. Chris Whalen, Chairman of Whalen Global Advisors, joins Morning Brief Hosts Seana Smith and Brad Smith to look at the bank’s results and what it means for large-cap financial institutions.

Whalen says the net interest income “is an illustration of the fact that JP is well managed. Jamie Dimon has, if you like, done it much better than the other big banks. That said, revenues are down substantially from the second quarter, which was an unusual quarter. In terms of turnover, they are more or less in line with the first quarter.”

“Going forward, you will see managers getting back into equities because many managers had pulled out of large caps earlier this year, thinking we were heading for a recession, but that’s not happening. Even though JP has built up reserves and increased reserves by more than 100% year on year, they are still not at a level that you need to worry about very much,” he says.

“Overall, JP will lead the pack again as large caps return to manager favor,” says Whalen, noting that in the second quarter “smaller names American Express, Axos and (and) Ameriprise all moved to rose to the top… I think managers liked the large caps in the first quarter (and) certainly last year, but not so much now.”

He adds that the big risk for the banking sector “is that we don’t get more rate cuts from the Fed, which I think is a likely scenario.”

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This post was written by Naomi Buchanan.