Three of the nation’s largest banks, JPMorgan Chase (NYSE:JPM), Wells Fargo (NYSE:WFC), and Citigroup (NYSE:C) released strong third-quarter earnings on Friday — all beating analysts’ estimates.
Banks are typically among the first to report earnings each quarter, and they are often considered bellwethers for predicting the larger market’s performance in the quarter. Thus, the big numbers posted by three of the four largest U.S. banks should be received favorably by investors, particularly since the industry was in crisis earlier this year with three major bank failures.
Big banks were not hit as hard as regional banks during the crisis, but nonetheless, these results are indicative of their resiliency just over six months after the crisis.
JPMorgan Chase sees 35% profit boost
JPMorgan Chase, the nation’s largest bank, posted revenue of $41.7 billion in Q3, a 22% increase over the third quarter of 2022. This topped estimates of $39.6 billion. Net income was up 35% year over year to $13.2 billion, or $4.33 per share, topping estimates of $3.89 per share.
JPMorgan’s consumer and community banking (CCB) business led the way with a 29% revenue increase to $18.4 billion. Loans were up 17% year over year firmwide, and net interest income jumped 30% to $22.9 billion, including the First Republic acquisition. Non-interest revenue was up 12% to $17.8 billion.
The revenue gains were primarily due to higher interest rates and higher revolving balances on credit cards, offset by a 3% decline in deposit balances.
Among its other segments, JPMorgan’s investment banking business saw revenue decline 10% year over year, while commercial banking was up 32% and asset and wealth management gained 10% in the quarter.
Overall, the return on tangible common equity (ROTCE) was 22%, up from 18% a year ago, and the efficiency ratio was 55%. Finally, credit quality was strong with provisions for credit losses down 10% to $1.4 billion.
Wells Fargo destroys estimates
Wells Fargo, the fourth-largest U.S. bank, saw its revenue climb 6.6% to $20.9 billion in the quarter, topping estimates of about $20.1 billion. Net income soared about 61% to $5.8 billion, or $1.48 per share, beating consensus estimates of $1.25 per share.
Loan balances were roughly flat at $943 million, compared to $945 million in the same quarter a year ago, while deposit balances were down 4.8% to $1.3 billion. Further, net interest income was up 8% to $13.1 billion, while non-interest income climbed 4% to $7.8 billion.
Provisions for credit losses were 53% higher at $1.2 billion, mainly to account for commercial real estate office loans and higher credit card loan balances.
Some of the catalysts for the big jump in earnings included an 8.9% reduction in non-interest expenses to $13.1 billion and the sale of approximately $2 billion of private-equity investments.
Wells Fargo also improved its ROTCE to 15.9% from 9.8% a year ago, while its efficiency ratio fell to 63% from 73% in Q3 2022.
Citigroup buoyed by institutional clients group
The third-largest U.S. bank, Citigroup, saw revenue increase 9% in the quarter to $20.1 billion, which topped estimates of $19.3 billion. Net income was up 2% to $3.5 billion, or $1.63 per share, which also beat estimates.
Citigroup enjoyed solid gains across the board, led by the institutional clients group, which includes the investment banking and treasury and trade solutions (TTS) divisions. This business saw revenue climb 12% year over year to $10.6 billion, with TTS seeing a 13% revenue jump. CEO Jane Fraser said it was the best quarter in a decade for TTS. Additionally, personal banking and wealth management recorded a 10% revenue increase to $6.8 billion.
In the earnings release, Fraser heralded recent changes that seek to better align the company’s organizational structure with its strategy.
“When completed, we will have a simpler firm that can operate faster, better serve our clients and unlock value for our shareholders,” she said.
Citigroup had a ROTCE of 7.7% in the quarter, down from 8.3% a year ago, while the efficiency ratio dropped to 67% from 69% in Q3 2022.
Shares of all three banks were rising on Friday, with JPMorgan Chase up about 3%, Wells Fargo up roughly 2.9%, and Citigroup climbing 2.3% as of 10:20 a.m. Eastern.
