Reality is beginning to settle in for three of the largest U.S. banks, according to their second-quarter results. While some aspects of the earnings reports from JPMorgan Chase, Citigroup, and Wells Fargo provided reassurance to the banks and their investors, potential challenges still loom.
As expected, all three banks reported growth in profits and revenues compared with both the last quarter and the previous year. These results were in line with or exceeded Wall Street estimates. Despite this, their stock prices fell in morning trading. Net interest income (NII), a key measure of how much banks earn from loans, was a focal point this quarter, with Wells Fargo and JPMorgan reporting disappointing results in this area.
Citigroup, however, saw promising signs in its second-quarter earnings, suggesting that CEO Jane Fraser’s corporate overhaul might already be effective. Citi’s expenses decreased by 2% year-over-year, totaling $13.4 billion for the quarter, thanks to the savings from simplification. Citi reported revenue of $20.1 billion, up 4% from last year, and net income of $3.2 billion or $1.52 per share, exceeding analysts’ expectations. Despite these positive indicators, Citi is still facing challenges in market share growth and expense reduction in other business areas.
Wells Fargo’s stock fell more than 7% on Friday morning after reporting a 9% decline in NII. The bank recorded $11.92 billion in NII during the second quarter, falling short of analysts’ expectations. However, both its revenue and earnings per share surpassed Wall Street estimates, with revenue reaching $20.7 billion and net income at $4.91 billion or $1.33 per share. The bank expects NII to bottom out in the second half of 2024 when the Federal Reserve is anticipated to start cutting interest rates.
JPMorgan’s second-quarter results had a mixed reception in the market. Its stock dropped 2% after reporting $22.9 billion in NII, short of Wall Street estimates. The bank maintained its guidance of around $91 billion NII for the year, disappointing some investors who hoped for an increase. Despite this, JPMorgan reported strong inflows and record quarterly profit of $18.1 billion or $6.12 per share, exceeding analysts’ forecasts. The bank also reported $50.2 billion in revenue for the quarter, a 22% year-over-year increase, driven by a rise in investment banking fees and profits from new Visa shares.