With Q2 earnings coming out, it’s always helpful to compare firms that are normally competing with each other to find trends that are affecting the industry as a whole. When we look at Citigroup Inc. (NYSE:C), JPMorgan Chase & Co. (NYSE:JPM), and Wells Fargo & Company (NYSE:WFC) we see clear signs that the financial sector is steadily recovering from the receding economic crisis. Even though there are still concerns about the impact that new regulations and slowing emerging markets could have on the financial sector, these five indicators show that there is plenty of room for optimism.
Bank Earnings – EPS
Earnings per share (EPS) are up at all three companies. JPMorgan Chase & Co. (NYSE:JPM) posted EPS 11 percent higher than consensus forecasts and Wells Fargo & Company (NYSE:WFC) was up 5 percent, according to a report from Barclays PLC (NYSE:BCS) (LON:BARC). Citigroup Inc. (NYSE:C) saw its EPS rise from $0.95 this time last year to $1.34 this quarter, at a time when many analysts were concerned about the effects that restructuring could have on the firm’s profits.
ValueWalk's Raul Panganiban David Barse, Founder and CEO of XOUT Capital, and discuss his unique approach to investing. Q1 2021 hedge fund letters, conferences and more The following is a computer generated transcript and may contain some errors. Interview with XOUT Capital's David Barse
Bank Earnings – Revenue growth
JPMorgan Chase & Co. (NYSE:JPM) saw 13.7 percent year-on-year and 0.4 percent sequential growth in revenue, while Wells Fargo & Company (NYSE:WFC) grew 0.4 percent year-on-year and 0.6 percent sequentially when many expected it to post a contraction. Citigroup Inc. (NYSE:C)’s revenues actually fell 3 percent quarter on quarter, but was still up 8 percent from this time last year, and beat analysts’ expectations by a solid 4 percent. The drop from Q1 to Q2 is a typical seasonal drop and doesn’t overshadow the companies’ annual growth.
Bank Earnings – Loan growth
Citigroup Inc. (NYSE:C)’s loan growth was up 4 percent quarter-on-quarter, in line with expectations, and loans were relatively stable at both JPMorgan Chase & Co. (NYSE:JPM) and Wells Fargo & Company (NYSE:WFC). All three banks have chosen to be conservative with lending, choosing quality loans over rapid growth. Citi in particular has stated that it expects high quality loans in emerging markets to be a solid income in the coming years.
Bank Earnings – Securities
Citigroup Inc. (NYSE:C)’s net income from securities is down 18 percent from last quarter, but up 56 percent from last year, a result that surprised analysts. JPMorgan Chase & Co. (NYSE:JPM) only saw net income from securities rise 1 percent year on year, but posted 18 percent sequential growth. Total assets under management at Wells Fargo & Company (NYSE:WFC) were up$18.2 billion year on year, largely due to higher market valuations of existing assets
Bank Earnings – Deposits
Deposit growth at all three banks was modest, no surprise with interest rates remaining so low, but deposit costs have also continued to drop. Deposits were up 1 percent at Wells Fargo & Company (NYSE:WFC), 3 percent at JPMorgan Chase & Co. (NYSE:JPM) and 3 percent at Citigroup Inc. (NYSE:C) year on year. Wells Fargo reported that it reduced the cost of interest bearing deposits by 2bp, and JPMorgan reduced them by 1bp.