The first round of bank earnings for the second half concluded on Friday, showcasing generally better-than-expected results from three of the largest U.S. banks: JPMorgan Chase & Co.
Despite the overall positive trend, market reactions were broadly negative, particularly for Wells Fargo, reflecting some specific concerns and risks.
JPMorgan
- The largest U.S. bank by assets, reported earnings per share (EPS) at $6.12, surpassing the consensus estimate of $4.29.
- Adjusted revenue reached $50.99 billion, slightly above the forecast of $50.2 billion.
- Loan balances were in line with expectations at $1.32 trillion
- Total deposits fell short at $2.4 trillion compared to the anticipated $2.43 trillion.
- Managed net interest income totaled $22.86 billion, slightly higher than the expected $22.82 billion.
- The provision for credit losses stood at $3.05 billion, above the estimated $2.83 billion.
The year-over-year growth in trading, at 10%, surpassed the high end of the intra-quarter guidance, which had anticipated revenue growth to be slightly above the mid-single digits year-over-year.
"We expect questions on the sustainability of trading going forward in a lower vol environment, and an update on the accelerating investment banking backdrop," Ramsden wrote.
CEO Jamie Dimon highlighted the bank's cautious outlook despite the strong performance.
"While market valuations and credit spreads seem to reflect a rather benign economic outlook, we continue to be vigilant about potential tail risks. These tail risks are the same ones that we have mentioned before. The geopolitical situation remains complex and potentially the most dangerous since World War II - though its outcome and effect on the global economy remain unknown," Dimon said.
Dimon also addressed the issue of inflation.
"There has been some progress bringing inflation down, but there are still multiple inflationary forces in front of us: large fiscal deficits, infrastructure needs, restructuring of trade and remilitarization of the world. Therefore, inflation and interest rates may stay higher than the market expects."
Shares of JPMorgan Chase fell 1.9% minutes after the New York stock market opened.
Wells Fargo
- Wells Fargo's EPS at $1.33, slightly higher than the $1.29 expected by analysts.
- The bank's revenue reached $20.69 billion, exceeding the $20.28-billion estimate.
- Total average deposits were close to expectations at $1.35 trillion
- Net interest income slightly below estimates at $11.92 billion compared to $12.12 billion anticipated.
- The commercial banking segment reported revenue of $3.12 billion, just shy of the $3.15 billion forecast.
"Our efforts to transform Wells Fargo were reflected in our second-quarter financial performance as diluted earnings per common share grew from both the first quarter and a year ago." Scharf also stressed the consistent credit performance and a slowdown in customers reallocating cash into higher-yielding alternatives.
Shares of Wells Fargo plummeted by 6.6%, on track for the worst session since mid-March 2023.
Citi
- Citi's EPS of $1.52 beat the estimated $1.39.
- Revenue of $20.14 billion, compared to the $20.11-billion forecast.
- Banking revenue was $1.63 billion, above the $1.55 billion estimate
- Wealth management revenue reached $1.81 billion, surpassing the expected $1.73 billion.
- U.S. personal banking revenue came in below estimates at $4.92 billion versus $5.12 billion expected.
"Our results show the progress we are making in executing our strategy and the benefit of our diversified business model," she said. "We achieved positive operating leverage with revenue up 4% and a 2% decline in expenses."
Shares of Citigroup fell 1.9%, mimicking Thursday's losses.
Broader Bank Sector Reaction
The Financial Select Sector SPDR Fund
Regional banks slightly outperformed, with the SPDR S&P Regional Banking ETF
