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 provided reasons for optimism, some concerns remain.
On Friday, all three banks reported growth in profits and revenues compared to both last quarter and last year, meeting or exceeding Wall Street estimates. However, their stock prices fell in morning trading.
Net interest income (NII), a key measure of earnings from loans, was a focal point this quarter. Wells Fargo and JPMorgan reported disappointing NII results. In contrast, Citigroup saw lower expenses and higher-than-expected revenue and profits, suggesting that CEO Jane Fraser’s corporate overhaul might be taking effect.
Notable insights from the earnings report include:
Jane Fraser’s Transformation at Citigroup
Citigroup’s second-quarter results highlighted progress from Fraser’s simplification plans, completed in early 2024, which included significant layoffs and additional expenses. Operating expenses decreased by 2% year-over-year to $13.4 billion. Revenue rose 4% to $20.1 billion, and net income was $3.2 billion or $1.52 per share, surpassing analysts’ expectations of $1.39 per share. Despite these gains, challenges remain in growing market share and reducing expenses in other areas. Citi’s stock fell more than 3% in morning trading, despite a 2% pre-market rise.
Wells Fargo’s NII Decline
Wells Fargo’s stock dropped over 7% after reporting a 9% decline in NII, missing analysts’ expectations of $12.12 billion with actual NII of $11.92 billion. Despite revenue growth to $20.7 billion and earnings of $1.33 per share, net income slightly declined to $4.91 billion. The bank expects NII to stabilize in the latter half of 2024, anticipating Federal Reserve interest rate cuts.
JPMorgan’s Mixed Results
JPMorgan’s second-quarter results led to a 2% stock decline. It reported $22.9 billion in NII, a 4% increase year-over-year but below Wall Street estimates. While maintaining its earlier NII forecast of around $91 billion, investors were disappointed with no increase. The bank expects NII to “normalize” this year due to expected rate cuts. JPMorgan also saw higher-than-expected provisions for loan losses and expenses, but reported record quarterly profits of $18.1 billion or $6.12 per share, surpassing analysts’ estimates. Revenue rose 22% to $50.2 billion, driven by investment banking fees and gains from new Visa shares.