Reality is beginning to settle in for three of the largest U.S. banks, as shown by their second-quarter results. Earnings reports from JPMorgan Chase, Citigroup, and Wells Fargo revealed some positive outcomes, but potential challenges remain.
As expected, all three banks, which reported earnings before the bell on Friday, experienced growth in profits and revenues compared to the last quarter and last year. These results either met or exceeded Wall Street estimates.
However, their stocks declined in morning trading on Friday. Net interest income (NII), a key measure of bank earnings from loans, was a significant focus this quarter, with Wells Fargo and JPMorgan reporting disappointing results in this area.
At Citigroup, lower expenses along with higher-than-expected revenue and profits indicated that CEO Jane Fraser’s corporate overhaul might be effective.
Here are some key insights from Friday’s earnings reports.
Jane Fraser’s Transformation at Citigroup
Citi’s second-quarter earnings provided a look into the early outcomes of Fraser’s simplification strategy completed in early 2024, which included thousands of layoffs and billions in additional expenses, causing investor concern in previous quarters.
However, Citi’s operating expenses fell 2% year-over-year during the three months ended June 30, due to savings from the simplification, totaling $13.4 billion for the quarter.
“Our results show the progress we are making in executing our strategy and the benefit of our diversified business model,” Fraser said in a statement.
Citi reported revenue of $20.1 billion for the second quarter, up 4% from last year and matching Wall Street estimates. The bank also reported $3.2 billion in net income, or $1.52 per share, exceeding analysts’ expected $1.39 per share.
Wells Fargo’s Drop in NII
Wells Fargo stock dropped more than 7% on Friday morning after reporting a 9% decline in NII. The bank saw $11.92 billion in NII for the second quarter, missing the $12.12 billion expected by analysts.
Despite the decline, both its revenue and earnings per share surpassed Wall Street estimates. Revenue increased to $20.7 billion from $20.5 billion a year ago, while net income fell to $4.91 billion, or $1.33 per share, from $4.94 billion a year earlier.
Wells Fargo anticipates NII to bottom out in the second half of 2024, when the Federal Reserve is expected to start cutting interest rates.
JPMorgan’s Mixed Results
JPMorgan’s second-quarter results were met with mixed reactions. The bank’s stock fell 2% following its earnings report.
The bank reported $22.9 billion in NII, a 4% increase year-over-year but short of Wall Street’s estimates. JPMorgan maintained its guidance from its annual Investor Day, keeping NII projections at around $91 billion, disappointing investors who hoped for a higher forecast this quarter.
Provisions for loan losses and expenses rose more than expected, but JPMorgan also reported strong inflows, beating analyst estimates. The bank reported a record quarterly profit of $18.1 billion, or $6.12 per share, a 25% increase from $14.5 billion last year, exceeding Wall Street’s projection of $17.3 billion in profit.
Revenue for the quarter reached $50.2 billion, a 22% year-over-year increase, driven by investment banking fees and gains from new Visa shares.