This morning’s earnings reports brought an earnings beat from Citigroup Inc (NYSE:C), a miss from JPMorgan Chase & Co. (NYSE:JPM) and in-line results from Wells Fargo & Co. (NYSE:WFC). Analysts from Goldman Sachs, Nomura, Susquehanna, Jefferies and Morgan Stanley provided their first thoughts on the results.
The good and the bad from JPMorgan’s earnings
In their report dated Oct. 14, 2014, Goldman Sachs analyst Richard Ramsden and his team noted that JPMorgan Chase & Co. (NYSE:JPM) came up slightly short of their estimate, posting earnings of $1.36, which was 2 cents shy of their estimate and the consensus estimate. They pointed out that the bank’s investment banking division saw strong results, even beating management’s guidance thanks to a rebound in activity in September.
Another bright area was credit, as higher reserve releases added 2 cents per share to earnings. JPMorgan guided for charge-offs to be under $5 billion for the full year and for at least $1 billion in reserve release from its consumer banking.
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The Goldman Sachs team believes JPMorgan looks well-positioned “from a quantitative perspective” for comprehensive capital analysis and review. The bank’s Basel III tier 1 common ratio rose to 10.1%, although it was a little short of the guidance of 10.5%.
In their report also dated Oct. 14, 2014, Morgan Stanley analysts Betsy Graseck, Manan Gosalia and Ethan Goldwasser pointed out some negatives. JPMorgan Chase & Co. (NYSE:JPM)’s core net interest margin fell 5 basis points to 2.59%. Assets under management fell 1.4% quarter over quarter, while loans were flat. Litigation costs were at $1.1 billion, which was a little higher than their estimate of $750 million.
The good and the bad from Wells Fargo’s report
In their report dated Oct. 14, 2014, Nomura analysts Bill Carcache and Yuman Lui said Wells Fargo & Co. (NYSE:WFC)’s in-line results came from a combination of higher-than-expected fee income and higher-than-expected litigation costs and expenses on foreclosed assets.
In their report with the same date, Susquehanna analysts Jack Micenko and Meng Jiao said that Wells Fargo slightly missed their earnings estimate of $1.03 a share, coming in a penny lower. The bank also missed their net interest income estimate of $11 billion, coming in at $10.9 billion. The Susquehanna analysts said catalysts for Wells Fargo shares include asset growth and credit quality trends and regional economic and employment trends.
The good and the bad from Citigroup’s report
In their report on Citigroup Inc (NYSE:C), Jefferies analysts Ken Usdin, and associates Bryan Batory and Joshua Cohen said the bank’s results were “pretty solid.” Citigroup controlled its core expenses, and it grew its net interest income by lowering funding costs. They also said the bank’s decision to exit consumer markets that are less profitable than others will be seen as a positive by investors.
They noted better-than-expected trading results and a modest increase in net interest income. They added that Citigroup’s capital build is improving as well thanks to deferred tax asset recapture.
Comparing Wells Fargo, JPMorgan and Citigroup
The Nomura team noted that when comparing the three banks that reported today, Wells Fargo & Co. (NYSE:WFC) saw a stronger growth in deposits in the third quarter compared to the other two. The result was higher excess liquidity and margin compression. The firm’s overall net interest margin is still higher on an absolute basis as well. Nomura put together a chart to compare the three banks’ results more clearly: