Reality is starting to settle in for three of the largest U.S. banks, as indicated by their second-quarter results. JPMorgan Chase, Citigroup, and Wells Fargo reported earnings before the bell on Friday, showcasing growth in both profits and revenues compared to the last quarter and last year. Although these results met or exceeded Wall Street estimates, their stock fell in Friday morning trading.
Net interest income (NII), a critical measure of how much banks earn from loans, was a focal point again this quarter. Both Wells Fargo and JPMorgan reported weaker results related to NII. At Citi, however, lower expenses and higher-than-expected revenue and profits suggested that CEO Jane Fraser’s corporate overhaul may already be yielding results.
Here are some key takeaways from Friday’s earnings:
Jane Fraser’s Transformation at Citigroup
Citi’s second-quarter earnings provided insight into Fraser’s simplification plans, completed in early 2024. The overhaul included thousands of layoffs and billions in additional expenses, worrying investors in previous quarters. However, Citi’s operating expenses dropped 2% year-over-year in the quarter ending June 30, totaling $13.4 billion. CEO Jane Fraser noted significant progress in the bank’s strategic and organizational simplification.
Citi reported $20.1 billion in revenue for the second quarter, up 4% from last year, and $3.2 billion in net income, or $1.52 per share, surpassing analysts’ expectations of $1.39 per share. Despite these positive indicators, Citi still faces challenges in expanding its market share and reducing expenses in other business areas.
Wells Fargo’s NII Decline
Wells Fargo’s stock plummeted over 7% on Friday morning after announcing a 9% drop in NII. The bank reported $11.92 billion in NII for the second quarter, falling short of the expected $12.12 billion. Nevertheless, Wells Fargo’s revenue and earnings per share exceeded Wall Street estimates, with revenue rising to $20.7 billion and net income slightly decreasing to $4.91 billion, or $1.33 per share.
The bank anticipates that NII will bottom out in the second half of 2024, once the Federal Reserve is expected to begin cutting interest rates.
Record Profits and Some Disappointment at JPMorgan
JPMorgan’s second-quarter results elicited mixed reactions from the market. Its stock fell 2% after the report showed $22.9 billion in NII, a 4% yearly increase but below Wall Street’s expectations. The bank maintained its annual NII forecast of approximately $91 billion, to the disappointment of some investors.
Despite this, JPMorgan reported a record quarterly profit of $18.1 billion, or $6.12 per share, a 25% increase from the same period last year. Revenue for the quarter was $50.2 billion, surpassing analysts’ expectations due to strong investment banking fees and gains from new Visa shares. However, provisions for loan losses and expenses rose more than anticipated.
These insights reflect the current state and future challenges for three of America’s financial giants.