JPMorgan profits fall but beat estimates while Morgan Stanley misses

Shares of JPMorgan Chase & Co. rose on Friday after the megabank beat analyst targets for third-quarter profit and revenue and said it would issue a top forecast for net interest income next quarter.

On a busy day for bank earnings, Wells Fargo & Co.
+ 4.34%

fell short of its earnings target, but its stock rallied as it beat revenue estimates.

Morgan Stanley

The stock fell after it fell short of Wall Street’s earnings and revenue targets.

Citigroup Inc.
+ 2.24%

shares rallied after breaking profit, although revenue fell 1% after breaking the impact of divestment.

Overall, banks benefited from higher interest rates and strong trading volumes, but investment banking trading activity fell sharply. Banks are also moving more capital into reserves and away from their overall profits in preparation for a potential recession.

As the largest bank in the US and the bank that backs the sector, JPMorgan Chase
+ 3.19%

in the words of CEO Jamie Dimon.

The bank said it expected to meet capital requirements under international Basel III banking guidelines and resume share buybacks in early 2023.

“In the US, consumers continue to spend with solid balance sheets, strong jobs, and well-run businesses,” said Dimon. “However, there are significant headwinds ahead of us – persistently high inflation leading to higher global interest rates, the uncertain impact of quantitative tightening, the war in Ukraine, which is accelerating increased all the geopolitical risks, and the fragile state of oil supply and prices. “

Dimon said the bank remains “prepared for bad results” so it can continue to operate even during the most difficult times.

Dimon’s prepared statement came a day after the CEO was quoted as saying the US consumer sector remains strong for now, but inflation will start to weigh on people in 2023.

Also read: JPMorgan CEO Dimon says inflation has yet to dampen consumer spending but give it time

Shares of JPMorgan Chase rose 2.6% on Friday after the company said its third-quarter net income fell 16.7% to $9.74 billion, or $3.12 per share , from $11.69 billion, or $3.74 per share, in the first quarter of the previous year.

Q3 revenue at the megabank grew to $32.72 billion from $29.65 billion in Q1 the previous year.

Wall Street analysts expect JPMorgan Chase to earn $2.90 a share on revenue of $32.12 billion, according to FactSet estimates. BILLION

The bank said a net credit reserve of $808 million ate into its net income in the latest quarter, compared with a net reserve release of $2.1 billion the year before.

Net interest income increased 34% to $17.6 billion, and net interest income excluding Market units increased 51% year-over-year to $16.9 billion due to higher interest rates.

Total assets under management by JPMorgan Chase fell 13% to $2.6 trillion due to stock market losses and tough bond market conditions.

Going forward, JPMorgan Chase said it expects fourth-quarter net interest income of about $19 billion, ahead of analysts’ estimates of $18.2 billion.

Oppenheimer analyst Chris Kotowski said calling JPMorgan’s results a failed quarter “would be an understatement” because “the reported numbers don’t match the underlying strength”.

The bank’s $6.8 billion in transaction revenue beat estimates, plus the bank’s net interest income jumped 16% from the previous quarter to $17.6 billion, about $1.3 billion. la compared to expectations, while expenses increased only 2.3% qoq.

Octavio Marenzi, CEO of management consulting firm Opimas said the bank’s results were “astonishing” and that if you remove the payments for the reserve loan, its returns are essentially constant.

“Individual businesses, such as investment banking and mortgages, are predictably bad, but this is more than offset by strength in the lending and trading sectors,” said Marenzi. different,” said Marenzi.

Prior to Friday’s trading, shares of JPMorgan Chase had lost 30.9% in 2022 compared with a 17.3% decline for the Dow Jones Industrial Average.
+ 0.15%

and lost 23.0% by S&P 500

Wells Fargo fails to hit profit target but shares rise

Shares of Wells Fargo & Co. rose 3.1% after the bank posted net income of $3.528 billion, or 85 cents per share, for the quarter through the end of September, down from $5,122 billion, or $1.17 per share, in the first quarter of the year.

Megabank fell short of its earnings-per-share target of $1.09 a share.

Wells Fargo’s revenue rose to $19.505 billion from $18.834 billion a year ago, ahead of FactSet’s $18.775 billion consensus.

Chief Executive Officer Charlie Scharf said performance was “significantly affected” by $2 billion, or 45 cents a share, in operating losses “related to litigation, customer remediation and other issues.” The legal issues are mainly related to many historical issues.”

However, the bank is seeing historically low delinquencies and high payout ratios, and “the timing of the deterioration of those measures due to high inflation remains unclear. “

The bank made $784 million in provisions for loan losses, following a $1.395 billion drop a year ago.

Net interest income increased by 36%, while non-interest income decreased by 25% due to lower mortgage income.

Overall, Wells Fargo had a “good” quarter, although larger-than-expected one-time fees and a reserve dented profits, Citi analyst Keith Horowitz said. But Wells Fargo also raised its outlook for net interest income “and we still see consensus rising through 2023,” Horowitz said.

So far, shares of Wells Fargo are down 12% for the year, ahead of Friday’s trading.

Morgan Stanley shares fall on results

Morgan Stanley fell 3.1% after the investment bank missed Wall Street’s earnings and revenue targets amid a drop in trading activity.

Morgan Stanley said its third-quarter net income fell to $2.49 billion, or $1.47 per share, from net income of $3.7 billion, or $1.98 per share. votes in the previous quarter.

Q3 revenue fell from $14.75 billion to $12.99 billion.

Wall Street analysts are looking for earnings of $1.52 per share and revenue of $13.29 billion, according to FactSet data.

“The company’s operations are resilient and balanced in an uncertain and difficult environment, delivering a 15% return on tangible equity,” said CEO James Gorman. “Wealth Management added $65 billion in new net assets and generated a pre-tax profit margin of 28%, excluding costs associated with integration, demonstrating scale and stability despite property values ​​decrease.”

Shares of Morgan Stanley have lost 19.2% in 2022 through the end of Thursday.

Citi beats target but stock loses ground

Citigroup shares rose 1.3% after the bank posted better-than-expected profit, but revenue fell 1% after breaking through the effects of divestment, driven by net interest income growth. more than offset by falling non-interest revenue.

Citi said its third-quarter net income fell to $3.5 billion, or $1.63 per share, from $4.6 billion, or $2.15 per share, in the quarter. last year.

Excluding divestment-related effects, earnings were $1.50 per share.

Total revenue increased to $18.5 billion from $17.4 billion.

According to a FactSet survey, analysts are looking for earnings of $1.42 a share and revenue of $18.26 billion for Citigroup.

Citi said it continues to scale back its operations in Russia and expects to end nearly all institutional banking services offered in the country in the next quarter. “To be clear, our intention is to reduce our presence in this country,” said CEO Jane Fraser.

Citigroup also said it continues to scale up its business in Russia. It will end “nearly all of the institutional banking we offer” next quarter as it works to reduce its presence there.

Citigroup shares are down 28.9% in 2022, through the end of Thursday.

Also read: JPMorgan and Goldman remain the top dogs in investment banking but business shrinks dramatically in 2022


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