Reality is settling in for three of the largest U.S. banks according to their second-quarter results. While earnings reports from JPMorgan Chase, Citigroup, and Wells Fargo offered some reassurances, potential challenges remain on the horizon.
As anticipated, all three banks, which announced their earnings on Friday, showed growth in profits and revenues compared to both the previous quarter and last year. These results met or exceeded Wall Street estimates.
Despite this, their stock prices fell in morning trading on Friday. Net interest income (NII) — a crucial measure of how much banks earn from loans — drew significant attention as both Wells Fargo and JPMorgan reported underwhelming results in this area.
Meanwhile, Citigroup reported lower expenses alongside stronger-than-expected revenue and profits, suggesting that CEO Jane Fraser’s corporate overhaul might already be bearing fruit.
Here are some key takeaways from Friday’s earnings reports.
Citigroup’s Transformation Under Jane Fraser
Citigroup’s second-quarter earnings revealed early positive results from Fraser’s simplification plans, completed in early 2024. The plan included significant layoffs and billions in additional expenses, which had concerned investors in previous quarters.
However, in the three months ending June 30, the bank’s operating expenses fell by 2% year-on-year, totaling $13.4 billion due to savings from the simplification. Citi reported revenue of $20.1 billion for the second quarter, up 4% from the previous year, matching Wall Street estimates. The bank also reported $3.2 billion in net income, or $1.52 per share, surpassing analysts’ expectations of $1.39 per share.
Despite these promising results, Citigroup still faces challenges in growing its market share and reducing expenses in other areas. Shares of Citigroup rose 2% in pre-market trading on Friday but fell by over 3% during morning trading. Year-to-date, Citi’s stock has risen by more than 20%.
Fraser highlighted ongoing efforts to address risk and compliance issues, following $136 million in fines from federal regulators for insufficient progress on data management problems.
Wells Fargo’s NII Drop
Wells Fargo’s stock dropped over 7% on Friday morning after reporting a 9% decline in NII. The bank reported $11.92 billion in NII for the second quarter, below analysts’ expectations of $12.12 billion.
Nevertheless, the bank’s revenue and earnings per share exceeded Wall Street estimates, with revenue rising to $20.7 billion from $20.5 billion a year ago. Net income was $4.91 billion, or $1.33 per share, for the quarter ending June 30, compared to $4.94 billion the previous year.
Despite growth in fee revenue, Wells Fargo faces ongoing challenges with NII and operating expenses. The bank expects NII to bottom out in the second half of 2024 when the Federal Reserve is anticipated to begin lowering interest rates.
JPMorgan’s Mixed Results
JPMorgan’s second-quarter results were met with mixed reactions. Its stock fell by 2% after reporting $22.9 billion in NII, which, although a 4% yearly increase, fell short of Wall Street estimates. The bank maintained its previous guidance of around $91 billion in NII projections for the year, disappointing some investors.
Despite uncertainties about NII, JPMorgan reported record quarterly profit of $18.1 billion, or $6.12 per share, for the second quarter — a 25% increase from $14.5 billion the previous year, surpassing analysts’ expectations of $17.3 billion in profit, or $5.88 earnings per share. The bank also reported $50.2 billion in revenue for the quarter, a 22% year-over-year increase, driven by a 50% rise in investment banking fees and a $7.9 billion gain from new Visa shares.