Three major U.S. banks released their quarterly results before today’s market open in the U.S. - JPMorgan Chase & Co (JPM.US), Citigroup Inc (C.US) and Wells Fargo & Co (WFC.US). Investors around the world were particularly interested in these numbers due to specific market environment that banks have been facing these days. As the ongoing crisis is set to be the worst depression since at least WWII, financial institutions are forced to cope with low (or even negative) interest rate environment as well as the wave of bankruptcies. Therefore, provisions for loan losses were in the spotlight too. Below we present a recap of today’s earnings releases.
JPMorgan Chase & Co (JPM.US)
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Adjusted revenue of $33.82 billion (vs estimate: $30.57 billion)
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Earnings of $4.69 billion or $1.38 a share (vs EPS estimate: $1.01)
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Provision for credit losses of $10.47 billion (vs estimate: $9.15 billion)
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Fixed income sales and trading revenue of $7.34 billion (+99% YoY)
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Entering 3Q with $34 billion of reserves
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“We are prepared for all eventualities as our fortress balance sheet allows us to remain a port in the storm,” CEO Jamie Dimon
Citigroup Inc (C.US)
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Revenue of $19.8 billion
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EPS of 50c (vs estimate: 32c)
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Total cost of credit: $7.90 billion (vs estimate: $7.66 billion)
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Fixed income sales and trading revenue of $5.60 billion (vs estimate: $4.59 billion)
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Investment banking revenue of $1.76 billion (vs estimate: $1.43 billion)
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“While credit costs weighed down our net income, our overall business performance was strong during the quarter, and we have been able to navigate the COVID-19 pandemic reasonably well,” CEO Corbat
Wells Fargo & Co (WFC.US)
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Revenue of $17.84 billion (vs estimate: $18.5 billion)
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First quarterly loss since 2008
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Loss per share of 66c (vs estimate loss/share of 13c)
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A record $9.5 billion for credit losses (about $4 billion more than expected!)
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Cut its dividend to 10 cents a share from 51 cents
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“We are extremely disappointed in both our second-quarter results and our intent to reduce our dividend. Our view of the length and severity of the economic downturn has deteriorated considerably from the assumptions used last quarter, which drove the $8.4 billion addition to our credit loss reserve in the second quarter,” CEO Charlie Scharf.
All in all, JPMorgan and Citigroup did well in the second-quarter despite the ongoing crisis, easily beating analysts’ expectations. Their trading desks benefited from a roller-coaster year while investment banking divisions reported some solid revenues as well. Even though provisions for loan losses skyrocketed, income statements may give some hope for now. The situation looks quite different for Wells Fargo as it clearly struggles under the circumstances - apart from huge credit losses, its income statement looks worrying as well. Nevertheless, one should keep in mind that Wells Fargo is mostly focused on retail banking.
Wells Fargo shares opened with a bearish gap today. Due to worrying balance sheet and income statement, bank’s executives decided to slash its dividend to 10 cents which might be earth-shattering for some long-term investors. At press time shares are plummeting roughly 8%. $22.45 area may serve as a crucial price zone in the short-run. Source: xStation5
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